Air Canada will raise fares to adjust to rising fuel prices

Air Canada’s fuel price rose 31% in the second quarter compared to last year. The airline therefore intends to limit some of this increase by increasing its rates, said Friday his CEO, Calin Rovinescu.

The Montreal airline had a good quarter in revenue, up 10.4% from the second quarter of last year, but adjusted earnings dropped to $114 million, or 41 cents per share.

Air Canada’s adjusted profit was almost twice as high in the same quarter last year, when it reached $226 million, or 82 cents per share.

Nevertheless, the performance of the most recent quarter was higher than analysts’ expectations, which averaged an adjusted earnings per share of 28 cents, according to forecasts.

Air Canada’s revenue for the three-month period ended June 30 was in line with expectations of $4.33 billion, up from $3.91 billion in the second quarter of 2017.

Rovinescu said the strong revenue reflects the attractiveness of the Air Canada brand and the continued strong demand for air travel in all major markets.

“However, we have changed our forecast for 2018 for certain key financial measures, given the rapid increase in aviation fuel prices in the first half of 2018,” Rovinescu said in a statement.

Air Canada now calculates that the fuel will cost 80 cents per liter in the third quarter and 78 cents per liter for the full year. The previous forecast for the entire fiscal year was 75 cents per liter.

“We expect to be able to mitigate by approximately 75% the effect of the projected increase in aviation fuel prices in 2018 through rate increases, other business initiatives and our cost transformation program.”

Looking forward to a reply from Aimia

Other Air Canada executives told analysts at a conference call on Friday that the company was analyzing the possibility of reducing some of its capacity in the fourth quarter in response to rising fuel prices.

In the shorter term, they added, Air Canada is awaiting Aimia’s response to an offer by the airline and its credit card partners to acquire the Aeroplan loyalty program. The consortium said its offer would expire on Thursday.

Air Canada has not abandoned its plan to create its own internal loyalty program, but believes this week’s offer would allow it to maintain a partnership with TD Bank and CIBC, which currently offer credit cards. Aeroplan Visa.

“We have not abandoned the idea of ​​launching our own loyalty plan in 2020,” said Rovinescu. If Aeroplan is acquired, Aeroplan Miles will simply be converted to our new program, [which will result in] a smooth transition for Aeroplan members.”

But Rovinescu pointed out that Aimia’s board had the option of rejecting the proposal and adopting a stand-alone strategy for Aeroplan, without Air Canada’s point exchange partnership.

“Of course, we consider it advantageous to continue to work with our two credit card partners in this program, TD and CIBC, if that’s possible … But if it’s not If so, we will do it with other banking partners.”

Earlier Friday, Air Canada posted a net loss of $ 77 million, or 28 cents per share, which included a $186 million loss on the expected leaseback of 25 Embraer aircraft and a $ 25 million foreign exchange loss. of dollars.

During the same period last year, Air Canada realized a $26 million gain with the sale of assets and a $68 million gain on foreign currencies.

The shares of Air Canada sold Friday, 7 cents on the Toronto Stock Exchange, where they closed at 23.41 dollars. The Aimia stock, which jumped 35.6% on Wednesday after the consortium announced its bid, took 6 cents to $3.50.