Air Canada reports record loss for 2001
Air Canada has reported its biggest-ever annual loss $1.25 billion as it struggled through what CEO Robert Milton called an "extraordinarily difficult" time for airline companies.
- BACKGROUNDER: Air Canada Timeline
The airline blamed the loss on a confluence of factors that hit its most profitable sector business travel. The economic downturn, the Sept. 11 terror attacks, and high fuel prices during most of the year were body blows that sent most of the world's airlines reeling in 2001.
- INDEPTH: Airline Decline
Air Canada said passenger revenues in Q4 dropped $440 million or 20 per cent compared to the prior year, with U.S. transborder traffic taking the biggest hit down 30 per cent.
"Air Canada's fourth quarter and full year performance reflect the extraordinarily difficult environment in which we and other comparable North American carriers were operating." Milton said in a release.
Milton indicated the results would have been even worse if he had not taken steps to cut jobs and seat capacity in the aftermath of Sept. 11. On Sept. 26, Milton announced 5,000 job cuts, adding to the 4,000 announced in August and 3,500 made the previous December. Dozens of planes were mothballed; a fifth of the airline's flight schedule was eliminated.
- FROM: Sept. 26, 2001: Air Canada chops another 5,000 jobs; grounds 84 planes
Still, Milton saw room for optimism Thursday that the turnaround would not be far off. "While it is difficult to accurately predict the speed of the economic recovery and the stability of fuel prices, we expect that by following a disciplined and strategic business plan we will return to profitability over the seasonally stronger quarters," he said.
That's not what airline analysts think. Of the 11 analysts polled by First Call/Thomson Financial, none expect the airline to turn a profit in fiscal 2002. The most optimistic forecast is for a loss of $1 a share.
Air Canada stock fell 11 per cent in the first few minutes of trading Thursday, sliding 55 cents to $4.30, before rebounding to close at $4.70.
The stock price has come back a long way from its October lows of $1.64. But it's still less than half its 52-week high of $11.45.
Air Canada still faces many non-financial battles too. The airline, which has an 80 per cent share of the domestic market, faces considerable political criticism. Transport minister David Collenette has called Air Canada's market share in Canada "untenable".
And the launch of its discount "Tango" service in October caused an uproar. Critics said it was merely an attempt to stifle competition by trying to drive rivals WestJet and Canada 3000 out of business.
- FROM: Nov. 9, 2001: Air Canada's 'Tango' service barely avoids cease-and-desist order