Article: Air Canada vows bankruptcy is not an option as its losses continue to mount -CAPA

CAPA -Centre for Aviation

Air Canada is vowing another bankruptcy is not an option as it continues to battle an unprofitability streak and continued fallout from its ongoing labour strife and the closure of its main maintenance provider Aveos. Patience appears to be wearing thin as four years of losses continue to plague investors looking for an elusive return on investment. The airline is opting not to give any clear-cut timing for a return to profitability as it first needs to achieve new collective bargaining agreements with two remaining labour groups – pilots and mechanics – that have staged work stoppages that in the short term have further diluted its brand.

Despite paying down CAD260 million (USD259.2 million) in debt during 1Q and achieving a more than CAD500 million (USD498.5 million) improvement in a cost reduction scheme, Air Canada overall remains unprofitable. Its CAD3.1 billion (USD3 billion) in expense outpaced the CAD3 billion (USD3 billion) recorded in revenues, which drove a 27% increase in its operating loss year-over-year to CAD93 million (USD92.7 million).

See related article: Air Canada faces a tough transition as it celebrates a milestone anniversary

CEO Calin Rovinescu recently stressed to analysts the job of transforming the inefficiencies inherent in a legacy carrier like Air Canada. However, he remarked a return to profitability was certainly the objective and Air Canada was “not looking for an easy way out of this”, alluding to speculation that the carrier would be forced into another restructuring after emerging from creditor protection in 2004. Addressing that speculation directly Mr Rovinecsu states: “That is of no interest to me.”

Key to Air Canada’s return to sustained profitability is reaching labour agreements with the Air Canada Pilots Association and the International Association of Machinists and Aerospace Workers. It has concluded deals with the rest of its unions after all employees in 2009 agreed to concessionary deals that pulled Air Canada back from the brink of bankruptcy. Three work stoppages initiated by those groups in Mar-2012 and Apr-2012 forced Air Canada to cancel thousands of flights and the erosion in customer confidence pressured the carrier’s bookings. Rival WestJetdeclined to quantify the number of customers it has picked up as a result of the turmoil at Air Canada, but carrier management recently offered anecdotal evidence of passengers walking the wing to WestJet. Air Canada only posted a 1% rise in traffic during April, compared to an 8.2% increase at WestJet.

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