Some good comments on here but for me (SLF in the AC SuperStupid Club, about 75% travel, apts in Delhi and Montreal), it seems that the discussion is missing some fundamentals:
Air Canada on Thursday reported a second-quarter loss, hurt by higher operating expenses, and said it expects third-quarter cost per available seat mile (CASM), excluding fuel expense, to decline.
...costs are expected drop next quarter (maybe the company is wrong or lying but still)...
Canada's largest airline plans to increase its third-quarter system available seat miles capacity by 7 percent to 8 percent.
...management is expecting or reacting to demand growth and offering more seats on average during next quarter, must have a reason for that...
It expects CASM, excluding fuel expense, to drop from 2009 levels by 4.5 percent to 5.5 percent.
For the second quarter, net loss was CAD$203 million (USD$199.6 million), compared with net income of CAD$155 million a year ago.
Operating expenses were up 4 percent, due mainly to capacity growth, higher fuel prices and increases in pension and commission expenses, the airline said in a statement.
...this capacity growth means that AC was offering more seats than they filled last quarter and that fuel prices didn't cooperate...
Passenger revenues rose 12 percent due partly to traffic growth, the company said. Passenger revenue per available seat mile increased 7 percent.
Operating revenue rose 13 percent to CAD$2.63 billion.
Whoa. Revenues went up on a per seat mile basis, more than costs, and more people were flying. The second fact is likely the lead in to summer holidays.
My analysis (er...guess, let's call it what it is), assuming that all the information in the article is accurate, is that this loss is a quarterly mismatch issue as AC adds available seat miles and raises expenses more quickly than revenues. That passenger revenue per seat mile is up so strongly is a great sign for the airline, that is, fundamentally great.
There are certainly structural issues with the company (is it international or domestic? Long haul or profitable-markets only? Can AC management keep their HR cost disadvantage in line against non-union carriers, i.e. use the advantage of a more expensive and professional workforce effectively against its competitors? And my own personal favourite question, can AC management find its moral bearings in the face of quarterly shareholder demands and the wall of temptation called cash flow?) but these are not reflected in this report on quarterly performance.
The world is not going to hell for AC because of this bad quarter, any more than it's going perfectly well. Personally, I think the Canadian market is pretty perfect for operating an airline in some ways - lots of customer demand because of the distances, and yes, a pretty captive market. It could be worse - this could be the US market (more brutal than Canada) or the Australian market (much smaller domestically, probably wonkier domestic / international demand issues).
How you make money on those customers is where the skill comes in (as well as getting the customers in in the first place) and I agree that in the cutthroat airline competition world, there's not much room for error, at all. But I don't see this report as the beginning of the end of anything, just a trigger for our cynical side here. Am I missing something huge here?