Air Canada Sees Drop in Profits for Labor-Impacted Second Quarter
By James Shillinglaw
August 08, 2012 10:37 PM
Air Canada reported operating income of $63 million in the second quarter of 2012, a decline of $10 million from the second quarter of 2011. It also reported a net loss of $96 million in the second quarter of 2012 compared to a net loss of $46 million in the second quarter of 2011. The airline recorded earnings before interest, taxes, depreciation, amortization and impairment, and aircraft rent (EBITDAR) of $314 million in the second quarter of 2012 compared to EBITDAR of $338 million in the second quarter of 2011.
"We reported passenger revenue growth of 3.3 percent in the quarter on traffic growth and an overall yield improvement,” said Calin Rovinescu, president and CEO. “Our Pacific performance was especially strong, with a revenue increase of 18.5 percent year-over-year. We continued to effectively manage capacity with a load factor of 83.5 per cent in the quarter.
Air Canada's operations were adversely impacted by labor disruptions in March and April of 2012, which resulted in a decline in bookings for travel originating in Canada in the immediate aftermath. But the airline said its brand is resilient and it was encouraged to see booking trends return to normal levels by the end of the second quarter of 2012.
Capacity and, as a result, passenger revenues were also negatively affected by aircraft scheduling changes due to the closure by Aveos of its maintenance, repair and overhaul (MRO) facilities in Canada. The airline estimated that the combined impact of the labor disruptions and the slight reduction in capacity stemming from the Aveos closure resulted in a reduction of $0.12 to $0.17 to earnings per diluted share in the second quarter 2012.
New collective agreements have now been finalized with the International Association of Machinists and Aerospace Workers (IAMAW) and the Air Canada Pilots Association (ACPA) through binding arbitration. Both the arbitrators in the IAMAW and ACPA arbitrations concluded that an extension of funding relief regulations is essential to the viability of Air Canada's pension plans. Air Canada said it plans to pursue such an extension for the benefit of all stakeholders.