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Air Canada eyes possible fee, fare hikes as currency bites: ‘No free lunch’

These are stories Report on Business is following Friday, March 7, 2014.

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'No free lunch'
Air Canada is looking at the possibility of higher fares or other fees as the country's weaker currency continues to bite, its chief executive officer says.

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In an interview with Bloomberg News, Calin Rovinescu said he couldn't say how fees and fares might change. But asked by Bloomberg if the airline will hike fares, the CEO responded that "there's no free lunch unfortunately, unless we can get the U.S. dollar to be more co-operative."

He added that there will be "some revenue strategies and some cost strategies."

As The Globe and Mail's Greg Keenan has reported, both Air Canada and WestJet Airlines Ltd. raised fares amid the decline in the Canadian dollar, which, among other things, means fuel costs are higher.

And given that fuel accounts for some one-third of expenses, it's no small matter.

WestJet, for example, hiked fares by 2 per cent in late January, while Air Canada Vacations and others introduced a $35 currency surcharge.

Mr. Rovinescu and Air Canada officials have said before that the airline is looking at various measures.

One thing that is known is that it is eyeing charging for initial checked luggage, as Mr. Keenan has written.

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Mr. Rovinescu told Bloomberg that he's happy with "the early stages" of plans to slash costs over five years.

Jobless rate holds at 7 per cent
Today's jobs report from Statistics Canada highlights the fact that the labour market has stalled, though there's a little more there than meets the eye.

True, the economy shed 7,000 jobs in February and the unemployment rate held stubbornly at 7 per cent. But the mix is interesting: Almost 26,000 part-time jobs were lost last month, but almost 19,000 full-time positions were created.

Job losses in the public sector, of almost 51,000, offset the gains among private employers, which added 35,000 positions.

Economists had projected an overall increase in employment of about 17,000 jobs, so the report from Statistics Canada fell shy of expectations.

And in a troubling sign, the federal agency noted that "there has been little overall employment growth since August 2013."

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Compared to a year ago, employment is now up just 0.5 per cent, or by 95,000, and the jobless rate is exactly where it was in February 2013.

Also worth noting is that the so-called participation rate, at 66.2 per cent, is at its lowest level since late 2001.

"Over all, employment has been essentially stagnant over the past half year, an oddity given that real GDP performance surprised to the upside over the same period," said chief economist Avery Shenfeld of CIBC World Markets.

"Look for softer quarterly growth, but somewhat better job creation, to bring these series back into line over the coming half year."

The U.S. jobs report, in turn, was better than expected, showing 175,000 positions created in February, though the unemployment rate ticked up to 6.7 per cent.

Canada targets grain lag
The Canadian government is taking tough new measures to clear the grain backlog in Western Canada, requiring railways to move a minimum amount each week and warning it will fine those that fall short, The Globe and Mail's Eric Atkins reports.

Canadian Pacific Railway Ltd. and Canadian National Railway Co. face penalties of $100,000 a day for failing to ship each week a combined 1 million tonnes of grain, Transport Minister Lisa Raitt said in Winnipeg today.

The move, which is in force for 90 days, follows months of complaints of poor service by grain handling companies and farmers, who are struggling to get a record crop to market amid a shortage of railcars.

Trade deficit shrinks
The jobs report may have been disappointing, but a separate report on Canadian trade showed a marked improvement.

The country's trade deficit narrowed in January to just $177-million from $922-million a month earlier, said Statistics Canada, as exports inched up 0.2 per cent and imports fell by 1.6 per cent.

That fall on the import side, by the way, is because of a decline in volumes of 2.6 per cent but higher prices to the tune of 1 per cent.

And on the export side of the ledger, volumes were actually down by 5.3 per cent while prices rose 5.8 per cent.

Canada's trade surplus with the United States widened to $3.6-billion from $3.2-billion, and the deficit with other countries narrowed a bit to $3.8-billion from $4.1-billion.

Separately today, the U.S. Commerce Department reported that America's trade deficit widened slightly, with both exports and imports rising.

Alberta budget lauded
The government that rules Canada's oil patch is winning praise today for a budget that closed out the year on a "high note."

As The Globe and Mail's Kelly Cryderman reports, the budget released yesterday by Alberta Finance Minister Doug Horner projects a 2014-15 operating surplus of $2.6-billion, boosted by energy and income tax revenue.

"With the economy flying high, oil production blossoming and key energy prices holding at relatively healthy levels, Alberta firmly expects to remain in an operational surplus in the coming years," said Warren Lovely of Canadian Imperial Bank of Commerce, noting that the province is "well positioned" to invest in areas needed for a rising population, such as health and education.

"Alberta closed out 2013 on an economic and fiscal high note," Mr. Lovely said.

"Alberta is set to be the fastest growing province in Canada and remains the only provincial jurisdiction in a net asset position."

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About the Author
Report on Business News Editor

Michael Babad is a Report on Business editor and co-author of three business books. He has been with Report on Business for several years, and has also been a reporter and editor at The Toronto Star, The Financial Post and United Press International. His articles have appeared in major newspapers around the world. More


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