Air Canada True to Form

[Strickontheice]

I see things are still the same at good old AC. Perhaps Bankruptcy on the horizon, further loss of conditions, no pension, well done folks.
:D
August 6, 2010
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.

Canada's largest airline plans to increase its third-quarter system available seat miles capacity by 7 percent to 8 percent.

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.

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.

[clunckdriver]

I hate to tell you buddy, but nobodys books look very rosy this last year,AC, Porter, WJ,all are hurting, my money is on Jazz being the survivour , the figures out of the US aint pretty and are going to hurt North of the border,knocking only AC aint gonna change these facts one iota.

[royalterrace]

WestJet's 21m PROFIT vs Air Canada's 203M LOSS looks pretty rosy from where I'm sitting.

[Strickontheice]

I agree with royalterrace, WJ seems to have its operation under control but Air Canada remains a blood bath. Jazz revenue is associated with an MOU with AC to feed customers to the mainline. If AC fails then Jazz will also feel the pain. WJ will pick-up the slack and foreign carriers will also benefit such as Emirates and Cathay. Both of these International carriers already offer a superior service to AC for a reduced price. AC also has pension deficits to cover which it will fail to meet and the pilot group will again suffer.

[Itsaliving66]

It is pretty rosey. If they stick to what makes them money they will continue to do very well long term. If they succumb to the age old pursuit of being number one they will follow the path of many before them, IMO.

[Flytdeck]

Would you please clarify your point and why you are isolating the pilots as a target for financial jeopardy. Is this group under greater risk of penalties than other employees in the airline?:confused:

[Vic777]

...why you are isolating the pilots as a target for financial jeopardy ... ?Probably because the Pilots don't have a Union.
is this group under greater risk of penalties than other employees in the airline? see above ...

[grind king]

Cathay just posted almost $1,000,000,000.00 CAD, $6.8billion HKD profit for the first 6 months of 2010. There are still some airlines making money. Still the best aviation job in Canada, hands down!!!

[troff]

...is like having the best tuk-tuk driver job in India.
Even if what you have is as good as it gets- it still sucks.

Cathay is as much of a Canadian job as Kolean or Emilates.

AC, WJ, Sunwing, anything up north... TC... It's a dog's breakfast.

Canada is over serviced and under populated. It's home based airlines will always bleed and if they are in the black, it's only just barely.

Unions and high wages have crippled the industry.

Those banking on a post retirement benefit may be disappointed.

Those paying for the service they get ARE disappointed.

After Canadian and Ward Air went down all the fun ended.

Now it's just miserable going to work in that abyss known as Canadian

aviation.

T

[clunckdriver]

Troff, High wages? You jest of course!

[20driver]

Though no fan of AC, running commercial aviation in Canada has always being a challenge.

Lots of space and little population means that making money is going to be difficult. In the end if the service providers don't make money everyone, employees and customers suffers.

World wide aviation has always defied financial gravity. Somewhere there is a report by Boeing that calculated for the capital deployed over that last 70 years some tens of billions in return are missing.

In the old days commercial aviation was a regulated utility overseen by government agencies that placed a premium on safety and were not terribly concerned with what customers paid. The customers were chattel assigned to various cartel members who "owned" them. You still hear pilots referring to passengers as "our work" - as if they own the passengers. You never hear a car dealer or a restaurant refer to their customers in those terms.

Things have changed, you have the local LOCO, Southwest, Ryan, EX etc that work with a high frequency, single equipment, short haul model that Canada cannot support except in very few markets. The other is the growth of the EK's, Cathy, Jet etc who are taking long haul traffic away from the bilateral legacy carriers. They are two incompatible markets. Different equipment, marketing, staff utilization etc. It is no coincidence that airlines making money were never part of the legacy bilateral cartels and stick to one segment or another.

So Canada is stuck in a changing world market. AC, among a lot of others, has never let go of its legacy thinking and converted to an operation that can make money. Being a LOCO really doesn't work and would mean abandoning long haul. Being purely long haul, doesn't seem to be an option due to markets and geography.

If commercial aviation is to thrive in Canada carriers need to make $$$. AC's biggest challenge is a change in mindset of the management, required first, and then the employees. I'm not sure that will ever happen short of AC going bust and breaking up in two completely separate companies and then developing management practices and costs that are compatible with the sector they are operating in.

It is going to be tough on the AC employees but slowly the competition is creeping in and there is little that can be done to stop it. Emirates, and others will get more slots in Toronto, Southwest and Jet Blue will show up in Canada, and Westjet will continue to grow.

The days of one airline operating mixed fleets and pilots working up that chain are dying. As a practical matter having multiple equipment bids and the associated costs makes the labor expensive even if the pilots themselves are not paid more than their peers.

20driver

[grind king]

Troff,

I'm not sure what your work experience is of CX, EK, Korean, or tuk tuks, but having worked for airlines in Canada and now overseas, Canadian aviation is a lost cause.

As for CX being about as good as a tuktuk driver and as Canadian as EK or Korean this is where you show your true ignorance. CX is actually Canadian, or Australian, or British or German or New Zealand or HK Chinese. Just depends on where you're based. Although the company head quarters are in Hong Kong, every based pilot is an employee of a company in that particular country. With all the tax, labor, union and employment rules associated with that country. So actually, Cathay is a lot more Canadian than EK or Korean.

I'd rather be a tuk tuk driver for CX, than a pilot for a Canadian based airline.

Enjoy your Canadian furlough, or down grade. IT WILL HAPPEN!!

[acchaladka]

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?

[ACAV8R]

"I see things are still the same at good old AC. Perhaps Bankruptcy on the horizon, further loss of conditions, no pension, well done folks."

Just like Wardair and Canadi>n, huh?