7DaysinParadise
Travel => Airlines => Topic started by: Bulldog on August 11, 2007, 09:58:10 PM
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Aug. 10 (Bloomberg) -- ACE Aviation Holdings Inc., which controls Air Canada, said second-quarter profit fell 50 percent from a year earlier because of accounting changes and a year- earlier gain from sale of a stake in US Airways Group Inc.
Net income fell to C$118 million ($112 million), or 98 cents a share, from C$236 million, or C$2.05, a year earlier, the Montreal-based company said in a statement. Revenue slipped 0.9 percent to C$2.66 billion.
ACE is selling assets to focus on improving performance at Air Canada, the nation's largest airline, which provides 97 percent of ACE's revenue. ACE gained C$83 million in the second quarter of 2006 from selling US Airways shares and agreed to sell a 70 percent stake in its aircraft maintenance unit for an undisclosed sum in June.
``Bottom line is, they're not charging enough for their seats,'' said Jacques Kavafian, an analyst at Research Capital Corp. in Toronto, who rates Air Canada shares ``hold.'' The airline's operating profit slid to C$88 million from C$113 million a year earlier, Air Canada said in a statement.
ACE changed its method of accounting for its Jazz regional airline and Aeroplan loyalty-rewards program, making 2007 results ``not directly comparable'' to a year earlier, the company said.
Shares of ACE fell 14 cents to C$24.30 as of 4 p.m. in Toronto Stock Exchange trading. Air Canada's stock dropped 28 cents to C$11.49.
`Good Things'
While Air Canada's profit fell, ``Montie is on the right track and I think he is going to make good things happen in the second half,'' Chief Executive Officer Robert Milton said in a conference call with analysts, referring to Air Canada CEO Montie Brewer.
Air Canada's revenue per available seat mile, a measure of earnings, rose 1 percent to 15.3 cents. Excluding fuel charges, unit cost, or expense per seat for each mile flown, rose 2 percent to 12.6 cents as the carrier spent more on new aircraft, lifted wages and paid more to lease planes.
Wage costs should ease in the second half of the year as Air Canada pays less overtime and fewer early retirement packages, Brewer said in a conference call with analysts.
Air Canada expects to add capacity in its domestic market by as much as 6 percent because of ``strong'' customer demand. Expansion in Canada and in flights to Asia, particularly China, should compensate for ``softness' in flights to the U.S., the carrier said.
Aircraft to China
Additional security measures, a glut of low-cost carriers and a new departure tax in the U.K. hurt that market, Brewer said. Air Canada plans to shift aircraft from its U.K. routes to China, he said.
The airline's load factor, a measure of how full flights are, rose to 82.7 percent in the second quarter, up 0.6 percentage points from a year earlier.
While Air Canada shares dropped by a third on the Toronto Stock Exchange this year before today, ACE's gained 10 percent.
A stronger Canadian dollar and fuel hedging should reduce ACE's fuel bill this year from last, the company said. The Canadian currency's 10 percent gain against the U.S. dollar this year helps ACE because the company buys fuel in U.S. dollars.
In the conference call, Milton said nine months is a ``realistic'' time in which to close ACE, though volatility in capital markets could cause a delay.
ACE, which was created as a holding company in 2004 after Air Canada emerged from bankruptcy protection, now holds a 75 percent stake in Air Canada, a 49 percent interest in Jazz and a 31.1 percent stake in the Aeroplan Income Fund.
http://www.bloomberg.com/apps/news?pid=20601082&sid=a8xnfPmUU0sg&refer=canada