Air Canada Reports Record Second Quarter 2013 Results

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Montreal, Quebec, Canada – Air Canada today reported adjusted net income of $115 million or $0.41 per diluted share in the second quarter of 2013 compared to an adjusted net loss of $7 million or $0.02 per diluted share in the second quarter of 2012.

Second quarter EBITDAR amounted to $385 million compared to EBITDAR of $312 million in the second quarter of 2012, an increase of $73 million or 23 per cent. On a GAAP basis, Air Canada’s net loss was $23 million or $0.09 per diluted share compared to a net loss of $161 million or $0.59 per diluted share in the same quarter of 2012.

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“Air Canada delivered its best second quarter financial performance in the Corporation’s history, with records reported in all three measures of operating income, adjusted net income and EBITDAR,” said Calin Rovinescu, President and Chief Executive Officer.

“These results are a clear indication that we are gaining momentum in our transformation towards sustainable profitability at Air Canada and underscore our Company-wide efforts to achieve cost containment and continue to improve on our revenue and yield performance.

“Our success in the quarter was not only financial – I am also especially pleased to report ongoing improvements in operational performance for the second consecutive quarter, with a 30 per cent improvement in On-Time Performance (OTP) for the quarter compared to the previous year.

This is a reflection of the professionalism, collaboration and dedication of Air Canada’s 27,000 employees in taking care of our customers while operating a safe and efficient airline. Also, we were once again recognized by global travelers as the Best Airline in North America for the fourth consecutive year, a wonderful recognition of our efforts.

“Market response to the launch of our new leisure carrier, Air Canada rouge, on July 1st has been very positive and our plans are on track for growing the Air Canada rouge fleet to serve more holiday destination markets where we can now compete on a more cost effective basis.

In addition, in early July, we began operating the first of five new Boeing 777-300ER aircraft, marking the first significant growth in the mainline wide-body fleet in ten years to support continued development of our international network and Toronto hub as our North American gateway. These aircraft also debut our new Premium Economy cabin, offering customers a high-value option for enhanced comfort and service on select international routes.

“Looking ahead, our focus remains on the execution of the Corporation’s business plan led by our four core priorities: cost transformation, international growth, customer engagement and culture change to transform Air Canada into a sustainably profitable company for its shareholders and employees,” concluded Mr. Rovinescu.

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Second Quarter Income Statement Highlights

Second quarter 2013 system passenger revenues were $2,757 million , an increase of $86 million or 3 per cent over the second quarter of 2012, on a 1.6 per cent growth in traffic and a 1.5 per cent improvement in yield.

Passenger revenue per available seat mile (RASM) increased 0.9 per cent from the second quarter of 2012 on the yield growth. Air Canada reported a passenger load factor of 83.0 per cent for the second quarter of 2013, 0.5 percentage points below the second quarter of 2012. In the premium class cabin, passenger revenues increased $19 million or 3.3 per cent on yield and traffic growth of 2.2 per cent and 1.1 per cent, respectively, over the second quarter of 2012.

Operating expenses decreased $42 million or 1 per cent from the second quarter of 2012. Operating expense increases in wages, salaries and benefits and capacity purchase costs were more than offset by operating expense decreases in aircraft fuel and depreciation, amortization and impairment expenses.

Air Canada’s adjusted cost per available seat mile (adjusted CASM), which excludes fuel expense, the cost of ground packages at Air Canada Vacations and unusual items, decreased 1.4 per cent compared to the second quarter of 2012. The 1.4 per cent reduction in adjusted CASM was in line with the adjusted CASM decrease of 0.5 per cent to 1.5 per cent projected in Air Canada’s news release dated June 10, 2013.

In the second quarter 2013, Air Canada recorded operating income of $174 million compared to operating income of $63 million in the same quarter in 2012, an improvement of $111 million .

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Liquidity Highlights

At June 30, 2013 , cash and short-term investments amounted to $2,107 million or 17 per cent of 12-month trailing revenues ( June 30, 2012 – $2,323 million or 20 per cent of 12-month trailing revenues).

At June 30, 2013 , adjusted net debt of $3,975 million decreased $162 million from December 31, 2012 , mainly reflecting the impact of an increase in cash balances.

Free cash flow of $147 million decreased $86 million from the second quarter of 2012, largely reflecting the addition of one Boeing 777 aircraft, partly offset by an increase in cash flows from operating activities due to better operating results.

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Current Outlook

For the third quarter of 2013, Air Canada expects its system ASM capacity, as measured by available seat miles (ASMs), to increase in the range of 2.5 to 3.5 per cent when compared to the third quarter of 2012.

Air Canada continues to expect its full year 2013 system ASM capacity to increase in the range of 1.5 to 2.5 per cent when compared to the full year 2012. Air Canada also continues to expect its full year 2013 domestic capacity to increase in the range of 1.5 to 2.5 per cent from the full year 2012.

For the third quarter of 2013, Air Canada expects adjusted CASM to decrease 1.5 to 2.5 per cent when compared to the third quarter of 2012.
Taking into account Air Canada’s adjusted CASM result for the second quarter 2013, Air Canada now expects its full year 2013 adjusted CASM to decrease in the range of 1.0 to 2.0 per cent from the full year 2012 (as opposed to the decrease of 0.5 to 1.5 per cent projected in Air Canada news release dated June 10 , 2013).

Air Canada continues to expect its full year 2014 system capacity to increase by 9.0 to 11.0 per cent when compared to the full year 2013. This projected increase in capacity, expected to be deployed primarily on international markets, is consistent with the fleet plan discussed in Air Canada’s Second Quarter 2013 MD&A and is due to the addition of five high-density Boeing 777-300ER aircraft, the first having been delivered in June 2013 and the remainder scheduled for delivery between August 2013 and February 2014 , the scheduled arrival in 2014 of the first six Boeing 787 aircraft, and the planned growth from Air Canada rouge.

Air Canada’s outlook assumes Canadian GDP growth of 1.25 to 1.75 per cent for 2013 and Canadian GDP growth of 2.0 to 3.0 per cent for 2014. Air Canada also expects that the Canadian dollar will trade, on average, at C$1.04 per U.S. dollar for the third quarter of 2013 and C$1.03 per U.S. dollar for the full year 2013 and that the price of jet fuel will average 87 cents per litre for the third quarter of 2013 and the full year 2013.

SOURCE: Air Canada
Internet : [highlight]aircanada.com[/highlight]