Air Canada takes on the low cost carriers

Air_Canada_LogoAir Canada’s move to launch its own loyalty programme in 2020 will help to attract more foreign investors who will bolster its stock price, CEO Calin Rovinescu said this week. Air Canada said it is negotiating with potential credit card partners and expects to announce a decision by year-end. The airline served notice last year that it does not plan to renew its 30-plus year partnership with Aimia Inc.-operated Aeroplan when the current contract ends in 2020.

Rovinescu said the industry as a whole isn’t fully rewarded because past airline bankruptcies on both sides of border made such investments risky.

But he said its decision not to renew its Aeroplan partnership will deliver up to about $2.5 billion of value for investors.

“That can actually go a long way to eliminating that multiple differential that exists with the US carriers,” he said.

Chief financial officer Michael Rousseau added that the share price should also be helped as it attracts more investors from the US, Europe and Asia. Currently, 42 percent of its shareholders are from outside of Canada.

Air Canada said it is preparing to deploy its Rouge low-cost airplanes on routes to Western Canada to compete with ultra-low-cost rivals.

The first routes will be between Montreal and Victoria, along with Toronto to Nanaimo and Kamloops, B.C., starting in June.

Three more planes will be added to the Rouge fleet, bringing it to 53 aircraft. One of the planes will be used to replace a regional aircraft.

The larger Rouge plane will reduce costs by decreasing the number of daily flights on that route.

WestJet Airlines is launching its Swoop ultra-low-cost airline in June to compete with Flair Airlines and other carriers preparing to start service.

Air Canada reported a smaller-than-expected loss in its first quarter as its revenue grew compared with a year ago, boosted by increased capacity and passenger traffic.

The Montreal-based airline said it lost $170 million or 62 cents per diluted share for the quarter compared with a loss of $13 million or five cents per share in the same quarter last year.

Operating revenue for the quarter totalled a record $4.07 billion, up from $3.64 billion as it experienced a strong performance in most areas and particularly in the business cabin.

Chief executive Calin Rovinescu told analysts that the strong results were achieved despite higher costs resulting from winter service disruptions.

“Despite these challenges, our first quarter performance demonstrates our ability to perform against headwinds and our progress towards consistent earnings and long-term sustained profitability,” he said.

The most recent quarter included losses on foreign exchange of $112 million compared with gains on foreign exchange of $70 million in the first quarter of 2017.

On an adjusted basis, Air Canada said it lost $52 million or 19 cents per diluted share compared with an adjusted loss of $63 million or 23 cents per diluted share a year ago.

Analysts on average had expected an adjusted loss of 44 cents per share for the quarter, according to Thomson Reuters.

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