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Air Canada passengers wait to check-in at Pierre Elliott Trudeau Airport on Wednesday, October 12, 2011 in Montreal.Ryan Remiorz/The Canadian Press

In the world according to Calin Rovinescu, low-cost airline divisions are a way of the future and Air Canada can't afford to be left behind.

Air Canada's chief executive officer said Friday that he's pleased with the carrier's strength in capturing international business traffic, but the race is on to compete for leisure passengers as established airlines seek to create discount units.

"We would be putting our heads in the sand, and pretending that it's not so, if we said that segment is just not important enough for us to pay attention to," Mr. Rovinescu said during a conference call with analysts.

Since Air Canada's plans to launch a discount leisure airline became public in April, foreign carriers have unveiled their own proposals, including ones from Singapore Airlines, Japan's All Nippon Airways (ANA) and Japan Airlines, he said. ANA is teaming up with Malaysian budget carrier AirAsia, Japan Airlines is co-operating with Australia's Qantas while others making moves in the low-cost sector include Thai Airways.

Air Canada wants to start its discount arm in 2012, but has run into resistance from its flight attendants and pilots. An arbitrator's decision on a new contract for flight attendants is scheduled for release next week.

Mr. Rovinescu said Air Canada will forge ahead with a budget airline if costs can be corralled, including "emotional and contentious" pension and wage issues. "Participation in this market segment is extremely important," he said. "Directionally, where the industry is going, this is not an invention that I dreamed up yesterday."

He made the comments after Montreal-based Air Canada reported that it lost $124-million in the third quarter as it got hurt by $281-million in foreign-exchange losses, compared with a $317-million profit in the same period last year. Its quarterly operating profit fell 12 per cent to $270-million but its revenue rose 7 per cent to $3.24-billion.

The airline has challenges such as labour negotiations with its pilots and mechanics, as well as absorbing high oil prices. Jet fuel costs rose in the third quarter to 85.8 cents a litre from 64.6 cents a litre a year earlier. "Fuel prices have trended higher, and there's still economic uncertainty out there," National Bank Financial Inc. analyst Cameron Doerksen said in an interview.

Air Canada's third-quarter EBITDAR (earnings before interest, taxes, depreciation, amortization and aircraft rent) rang in at $535-million, down from $580-million a year earlier but surpassing analysts' estimates. UBS Securities Canada Inc. analyst Tasneem Azim noted that unit costs fell slightly, excluding fuel.

Dreaming of 2014

Air Canada's wait for its often-postponed Boeing 787s will take longer than expected.

The carrier is slated to take delivery of seven of its 787s in 2014, part of an order for 37 Dreamliners. Discussions are being held to determine Boeing Co.'s delivery schedule for the remaining 30 aircraft. Air Canada originally placed its order for 787s in 2005, with delivery targeted for 2010.

But a series of production delays dogged Boeing. Air Canada had been counting on receiving its first Dreamliner in the fourth quarter of 2013, so the latest snag could mean a further wait of roughly six months.

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