Air Canada planes sit on the tarmac at Pearson International Airport in Toronto in this file photo.MIKE CASSESE/Reuters
After months of labour unrest and lost profits earlier this year, Air Canada posted a healthy quarterly gain as its planes filled and employee relations calmed.
The carrier announced a third-quarter profit of $429-million, or $1.54 per diluted share, compared with a net loss of $124-million, or 45 cents, a year earlier.
"I'm extremely pleased with these results, particularly in view of the challenges we incurred in the first two quarters of the year and the ongoing challenging economic times worldwide," Calin Rovinescu, Air Canada's president and chief executive officer, said Thursday.
Analysts also tended to look favourably, as demand remained strong this summer and the airline lowered its debt, adding more stability to its financial picture. As Cameron Doerksen of National Bank Financial highlighted, "The balance sheet remained comfortable with $2.2-billion in cash and equivalents."
This puts Air Canada in a better position as it reorganizes its fleet to accommodate a new low-cost leisure carrier scheduled to begin operating in July, 2013.
That subsidiary will launch initially with two Boeing 767s-300ER planes and two Airbus A319s, released from Air Canadas main fleet and made possible by contract negotiations with pilots earlier this year. Two Boeing 777s will be added to the main fleet to help make up that lost capacity.
Air Canada eventually hopes to have the leisure carrier fly up to 20 Boeing 767s and 30 Airbus A319s, bound for vacation destinations in the Caribbean and Europe. The official unveiling of the new carriers name and schedule is due this fall.
"The key here is that with Air Canada securing fleet flexibility from recent union negotiations, the company can significantly optimize its mainline fleet," RBC Dominion Securities analyst Walter Spracklin said. "Set to take 37 Boeing 787s for the mainline fleet, Air Canada can now push less economical aircraft onto its leisure carrier, which will likely have a much better cost structure in place."
And as WestJet Airlines Ltd. prepares to launch its regional airline, Air Canada is girding for more competition, especially in already competitive routes, such as the triangle of Montreal-Ottawa-Toronto. "The competition in the triangle has been intense. Our strategies and our plans assume that it continues to be intense," Mr. Rovinescu said.
With Air Canadas focus on international growth, it is typically affected by global factors, from fuel prices to last summers London Olympics, which had an impact on British flights "as Canadians avoided travelling to the U.K., in part due to higher hotel costs, while some passengers originating from the U.K. choose not to travel at all," he added.
Revenue from service to Asia was strong, increasing 13.9 per cent over the same period last year, the largest percentage increase among Air Canadas major markets.
Then there are certain details shareholders like, but make passengers grumble, such as new baggage fees introduced last fall that saw "a significant growth" in the quarter and helped boost earnings. Meanwhile, the carriers struggling on-time performance, due partly to the labour dispute, was described by Mr. Rovinescu as a "challenge" and "a great of opportunity for us to improve."