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Financial results

Air Canada Reports First Quarter 2014 Results

Air Canada today reported first quarter earnings before interest, taxes, depreciation, amortization and impairment, and aircraft rent (EBITDAR (1)) of $147 million compared to EBITDAR of $145 million in the first quarter of 2013. Air Canada’s EBITDAR of $147 million was consistent with the EBITDAR projection provided in the airline’s news release dated April 3, 2014 which forecasted EBITDAR in the first quarter of 2014 to be in line with last year’s level. An operating loss of $62 million in the first quarter of 2014 reflected a $44 million improvement from the same quarter in 2013. On a GAAP basis, in the first quarter of 2014, Air Canada reported a net loss of $341 million or $1.20 per diluted share compared to a net loss of $260 million or $0.95 per diluted share in the first quarter of 2013. The net loss in the first quarter of 2014 included foreign exchange losses of $161 million versus foreign exchange losses of $40 million in the first quarter of 2013. On an adjusted basis(1), the airline reported a net loss of $132 million or $0.46 per diluted share compared to a net loss of $143 million or $0.52 per diluted share in the first quarter of 2013, an improvement of $11 million or $0.06 per diluted share.

„I am pleased to report that despite the challenges of several extreme weather events and the impact of a much lower Canadian dollar in the first quarter, we delivered improved EBITDAR and adjusted results over the previous year,” said Calin Rovinescu, President and Chief Executive Officer. During this somewhat difficult quarter, we continued to make good progress on our cost transformation initiatives with adjusted CASM decreasing by 2.5 per cent and, nonetheless, achieved a solid revenue performance. Based on forward bookings, we expect a strong summer travel season ahead.

„As we enter a new phase of network growth and capital investment in our fleet and product, the successful completion of our unsecured notes offering in April was another important milestone for Air Canada. I was especially pleased with the offering’s reception. The capital markets demonstrated their confidence in our future by supporting our debt on an unsecured basis on very competitive terms, recognizing, among other things, our improved leverage ratios, credit ratings and profitability, as well as the elimination of our pension deficit.

„We have many exciting developments coming up with respect to our fleet and we are now starting to reap the benefits of our significant capital investment program. We look forward to the delivery flight of our first of 37 Boeing 787 Dreamliners on May 18th, a very important step in Air Canada’s fleet renewal that will provide further cost improvements and opportunities to develop international markets on a more competitive basis.

„Moreover, in order to improve the economics of our standard Boeing 777 long-haul fleet and to provide customers with a consistent product to our new Boeing 787 Dreamliners, we are planning on converting 12 Boeing 777-300ER and six Boeing 777-200LR aircraft into a more competitive configuration, adding a much desired premium economy cabin and refurbishing the International Business Class cabin to the new Boeing 787 state-of-the-art standards. The reconfiguration is designed to both lower unit costs and to allow us to compete more effectively with a harmonized product offering across our flagship international fleet. The reconfiguration project is planned to start in late 2015 and be completed in the second half of 2016.

„I would like to thank our employees for their ongoing focus on taking care of customers and transporting them safely to their destination, especially during the very challenging weather conditions we experienced in the first quarter.”

First Quarter Income Statement Highlights

System passenger revenues amounted to $2,608 million, an increase of $81 million or 3.2 per cent from the first quarter of 2013, on a 2.9 per cent growth in traffic and a 0.4 per cent improvement in yield. Passenger revenue per available seat mile (PRASM) decreased 0.5 per cent from the same quarter in 2013 on a 0.7 percentage point decline in passenger load factor which was partly offset by the yield improvement. In the first quarter of 2014, system premium cabin revenues increased $37 million or 7.0 per cent on yield and traffic growth of 4.5 per cent and 2.4 per cent, respectively.

Operating expenses amounted to $3,127 million, an increase of $69 million or 2 per cent from the first quarter of 2013 on a 3.8 per cent increase in capacity. The unfavourable impact of a weaker Canadian dollar on foreign currency denominated operating expenses (mainly U.S. dollars), when compared to same quarter in 2013, increased operating expenses by $130 million. This currency impact was partially offset by a favourable currency impact on passenger revenues of $38 million, realized currency derivative gains of $23 million and lower fuel prices (in U.S. dollars).

Air Canada’s adjusted cost per available seat mile (adjusted CASM(1)), which excludes fuel expense, the cost of ground packages at Air Canada Vacations and unusual items, decreased 2.5 per cent compared to the first quarter of 2013. The 2.5 per cent reduction in adjusted CASM was in line with the adjusted CASM decrease of 2.0 to 2.5 per cent projected in Air Canada’s news release dated April 3, 2014.

In the first quarter of 2014, Air Canada recorded an operating loss of $62 million compared to an operating loss of $106 million in the first quarter of 2013, an improvement of $44 million.

Financial and Capital Management Highlights

At March 31, 2014, unrestricted liquidity (cash, short-term investments and undrawn lines of credit) amounted to $2,515 million (March 31, 2013 – $2,092 million). Air Canada’s principal objective in managing liquidity risk is to maintain a minimum unrestricted liquidity level of $1.7 billion.

At March 31, 2014, adjusted net debt(1) amounted to $4,426 million, an increase of $75 million from December 31, 2013. The increase in adjusted net debt was driven by net borrowings of $116 million and an unfavourable currency impact of $155 million, partly offset by higher cash balances of $182 million. The airline’s adjusted net debt to EBITDAR ratio was 3.1 at March 31, 2014 versus a ratio 3.0 at December 31, 2013. Air Canada uses this ratio to manage its financial leverage risk and its objective is to maintain the ratio below 3.5.

Free cash flow(1) of $34 million declined $113 million from the same quarter in 2013. While operating cash flows improved year-over year, free cash flow was impacted by the addition of the fifth and final Boeing 777-300ER aircraft delivered in February 2014.

For the 12 months ended March 31, 2014, return on invested capital (ROIC (1)) was 10.7 per cent versus 8.0 per cent at March 31, 2013. Air Canada’s goal is to achieve a sustainable ROIC of 10 to 13 per cent by 2015.

Source / Author: Air Canada

Autor: Redakcja Świat

Redakcja Świat