Air Canada Says Net Loss Widened to C$288 Million

[Bulldog]

By Hugo Miller and Mary Jane Credeur

May 8 (Bloomberg) -- Air Canada, the country's largest airline, said its first-quarter net loss widened to C$288 million ($285 million) on surging fuel prices and costs tied to cargo investigations.

The C$2.88 per-share loss compared with a year-earlier deficit of C$34 million, or 34 cents, the Montreal-based carrier said today in a statement. Revenue rose 7.4 percent to C$2.73 billion. The airline reported a loss from operations that was smaller than analysts estimated.

Air Canada cut its forecast for capacity growth, to no more than 2.5 percent from its February estimate of as high as 4 percent, in an effort to cope with record fuel costs. The airline will also suspend flights to Rome and Osaka, and park four older, less efficient aircraft.

``It was a very strong operating performance, and I was impressed with their ability to manage costs in the face of record fuel,'' Chris Murray, an analyst at CIBC World Markets in Toronto, said in an interview. He rates the shares ``sector outperform'' and estimated an operating loss of 63 cents.

This year's results included a C$125 million provision for cargo investigations and C$89 million in currency-exchange losses. Excluding those items and losses on capital assets, the operating loss was C$12 million, or 62 cents, which was narrower than the 77-cent loss average estimate of nine analysts surveyed by Bloomberg.

Air Canada fell 15 cents to C$7.90 at 10:19 a.m. in Toronto Stock Exchange composite trading. The stock dropped 49 percent in the past year before today.

Fuel Outlook

Air Canada is a unit of Montreal-based ACE Aviation Holdings Inc., which is focusing on the airline and unloading stakes in assets including the Jazz Air regional carrier.

Fuel price per liter jumped 20 percent to 75.2 cents for the quarter, resulting in C$130 million in additional costs. The company's outlook assumes that fuel will average 91 cents per liter in the second quarter and 89 cents per liter for the full year, including hedges.

Air Canada said it will ``aggressively review'' all routes and may trim additional flights because of fuel costs. The airline is targeting C$100 million in cost cuts.

``Air Canada is undertaking a number of revenue and cost initiatives to address the effects of the unrelenting, record high price of fuel,'' Chief Executive Officer Montie Brewer said in the statement.

The 2008 outlook assumes that growth in North America and globally will slow, and that a ``mild economic recession'' will take place in the U.S., the company said.

Air Canada is among the airlines being investigated by the European Commission, the U.S. Department of Justice and the Competition Bureau in Canada for alleged anti-competitive cargo pricing. The C$125 million provision recorded in the first quarter doesn't cover the proceedings in all jurisdictions, the company said.

To contact the reporters on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net; Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net.
Last Updated: May 8, 2008 10:52 EDT

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