Air Canada Reports $203M Loss in Q2

[Localizer]

By The Canadian Press, cbc.ca, Updated: August 5, 2010 11:42 AM
Air Canada reports $203M loss in Q2

Air Canada says it lost $20 million after ash from a volcanic eruption in Iceland closed European airspace in April.

Montreal-based Air Canada says deeper foreign exchange losses pulled the company to a net loss of $203 million in the second quarter.

Canada's largest airline (TSX:AC) says the losses were equal to 72 cents per diluted share on an unadjusted basis.

That compared to net income of $155 million, or $1.55 per share, in the second quarter last year.

The results included a foreign exchange loss of $156 million during the period.

For July, Air Canada also reports a record system load factor of 84.9 per cent on a consolidated basis with Jazz.

That compares to 83.6 per cent in July 2009, an increase of 1.3 percentage points.

System traffic increased 10.8 per cent -- an increase of 9.1 per cent.

Air Canada also says it lost about $20 million in operating profits from flight cancellations after the closure of European airspace in mid-April because of ash from the volcanic eruption in Iceland.


Jazz Air Income Fund reports Q2 profit down from year ago, revenue falls too
By The Canadian Press

HALIFAX - Jazz Air Income Fund (TSX: JAZ.UN) reported Tuesday a drop in second-quarter earnings compared with a year ago as higher fuel costs bit took a bite out of profits.

The regional airline said it earned $15.6 million or 13 cents per unit for the quarter ended June 30 compared with a profit of $25.4 million or 21 cents per unit a year ago.

Revenue totalled $359 million, down from $373.6 million.

Aircraft fuel costs climbed to $71.4 million, up from $62 million in the second quarter of 2009.

Jazz provides regional service under a capacity purchase agreement with Air Canada.

[canuckjetsetter]

Good to hear about the operating profit! Nice work team AC!! Especially impressive TPAC numbers! +90% LF on an 36% ASM increase in the region.

At the end of the day, however, the company as a whole entity lost money - and quite a bit of it. I am overly concerned by their (in my opinion) aggressive capacity increases. This industry has been proven quite cyclical since, well its inception, and the fact AC is continuing to act on this model concerns me if in fact we are headed into a double-dip recession or when our economy – or worse yet, our neighbour’s - slows again.

Most U.S. airlines are being admired by analysts this last quarter for controlling their capacity even with the onset of increased demand. A practice, which in the past, has created the boom and bust cycle and led to countless bankruptcies.

But I digress. I am sure AC has done their homework, and they do have that overhanging deferred pension which I'm sure is enticing them to squeeze any added profit from their current available assets. I wish them all the best for Q3 and for the entire FY2010.

[Glen Quagmire]

$52 Million in interest payments in one quarter from the the rescue financing, government handout my ass.

Load factor, revenue and yields up over last year with capacity up nearly 10%, I would say they are managing capacity well.

[Jaques Strappe]

If you are still losing money when the airplanes are over 85% full, all the time, the problem isn't with capacity.

[Disco Stu]

If you are still losing money when the airplanes are over 85% full, all the time, the problem isn't with capacity.

Operationally, so in relation to load factor, AC didn't lose money.

[Old fella]

Whatever......... but lately, what I have been hearing from fellow travellers(a good many), Air Canada's on time performance, service and general customer satisfaction is first rate.

[Brick Head]

If you are still losing money when the airplanes are over 85% full, all the time, the problem isn't with capacity.

Operationally, so in relation to load factor, AC didn't lose money.

Not really,

Operating loss/income does not include interest.

However your point is an excellent one. As employees all we care about is operational profitability. Currency fluctuations come and go. Good will comes and goes. One offs come and go. We get profit showing on currency gains yet operationally we lost money. We get losses, from good will yet made money.

A good example was in Q2 2009. AC declared a 155 million dollar profit. If you look at what I posted below AC, operationally lost 207million. The difference? Foreign exchange gains.

So how do you keep it simple and cut through the BS?

Operating income/loss minus interest.

Q2 2010 operating income 75million minus (133) interest = loss of (58) million

Q2 2009 operating income (113)million minus (94) interest = loss of (207) million

That is a significant change from Q2 2009, and the reason why the stock price has been up as of late. In fact if AC did not have to pay the club loan the difference is just short of 200million. Is it enough? Are we out of the woods? No. But it is a good start. Recovery takes time. This was really only CR's 3rd quarter past last summers crisis. His changes have really only had impact for about 2 quarters.

I would expect AC to show a very large profit in Q3. However I suspect it will also have a bunch of foreign exchange gains (the dollar came back a bit) bloating the gain/loss.

[yycflyguy]

My question is that the CAD was around .90-.92USD for most of the quarter. Fuel is paid in USD for both AC and Jazz. The CAD is up compared to the Euro so where is this foreign currency loss coming from if most of the bills are paid in USD and there are operational costs associated with a lower Euro?

Are we still paying the $104 fuel hedge or has that expired?

I don't think you can expect to see parity between the USD and CAD for the long term.

[Brick Head]

Corporations buy product on credit. 60-90 days usually. Lets say AC buys 1 gallon of fuel in April for one dollar in SFO. The exchange rate in April was .99497302. Lets say AC pays the bill in Jun when the exchange rate is now .96192946. That is a foreign exchange loss of .037cents.

Date......... 1 USD -> CAD 1 CAD -> USD

Jan 2010..... 1.04347500........ 0.95833633
Feb 2010.... 1.05592500........ 0.94703696
Mar 2010.... 1.02328261........ 0.97724714
Apr 2010..... 1.00505238........ 0.99497302
May 2010.... 1.04028000........ 0.96127966
Jun 2010..... 1.03957727........ 0.96192946
Jul 2010...... 1.04293810........ 0.95882968

The declining dollar from march through Jun is what caused the foreign exchange loss. Today the C$ is at .9738. For Q3 expect a foreign exchange gain.

Just ignore it. It doesn't reflect performance. Yes it is still money. Therefor needs to be reconciled on a balance sheet. Meaningless if you want to determine operational viability.

[yycflyguy]

Thanks for the explanation.

Any comment on whether we are still paying too much on the fuel hedge?

[Brick Head]

I read the financials a few days ago now. I believe it was $86 on a 1/3rd of our fuel through the end of the year.