Neha Jain: http://canadaaviationnews.blogspot.com/12

Air Canada is slated to begin talks Friday with the union representing 3,800 of its sales and service agents.

1. Air Canada earnings lifted by gains
Air Canada delivered a fourth-quarter result Thursday that fell just shy of analyst expectations as the country's largest carrier braces for collective bargaining with its various unions.

Labour negotiations are slated to begin with the Canadian Auto Workers, which represents 3,800 sales and service agents at the airline, in Toronto Friday.

The CAW, whose current contract expires on Feb. 28, rejected what it called a "meagre" one-time $27-million performance incentive offered to Air Canada employees in the fourth quarter, saying they will seek "a real wage increase" in bargaining.

"Our members' wages have not even kept pace with half the rate of inflation since 2002," CAW president Ken Lewenza said in a statement. "This is deplorable."

Discussions have already commenced with the pilots union, whose contract expires on March 31, but no dates have been set with its flight attendants' unions or the machinists' union, whose contracts expire on the same day. All five of Air Canada's unions have placed wage increases at the tops of their agendas after agreeing to a 21-month wage freeze and moratorium on the airline's pension contributions over the same period in July 2009.

Calin Rovinescu, Air Canada chief executive, said he has made a concerted effort to keep Air Canada's unions abridged on the airline's finances over the past two years.

"I sincerely believe we have a good foundation to find common ground, and achieve a satisfactory outcome," Mr. Rovinescu said on a conference call.

The news comes as the carrier reported a net income of $134-million, or 42¢ a share, in the fourth quarter -- compared to a net loss of $56-million (25¢) for the same period last year -- aided by a onetime $111-million foreign exchange gain.

Excluding that, and other one-time items, it reported a 6¢-a-share loss, steeper than the Street's consensus of a loss of 4¢ a share.

Analysts tend to measure their expectations for Air Canada on its earnings before interest, taxes, depreciation and rent [EBITDAR] due to the volatility in its numbers and numerous one-time charges. The airline said its EBITDAR doubled during the quarter to $334-million from a year ago, on improved demand, higher airfares and better cost controls.

Revenue rose 11% to $2.6-billion for the quarter. Unit revenue, as measured by revenue per available seat mile, improved 3% system-wide, primarily due to higher fares.

Management said they were also on track to improve their balance sheet by $530-million by the end of 2011 through various revenue and cost initiatives. "The results reported today confirm that we are indeed headed in the right direction," Mr. Rovinescu said on a conference call.

Meanwhile, Air Canada continues to try to secure terminal space at the Billy Bishop Toronto City Airport in talks with Robert Deluce, who is chief executive of both Air Canada's rival, Porter Airlines Inc., and the airport's terminal operator, City Centre Terminal Corp.

Air Canada already has its planes parked at nearby Pearson International for the new Air Canada Express service from the Island, and is "ready to go" once a deal is stuck.

"We are operationally ready to resume service at the Island airport," he said, but added he had no timeline for when the talks would be completed.

Air Canada had originally planned to launch service from the Island in February. Mr. Deluce would not comment Thursday on the state of the talks.

Geoffrey Wilson, chief executive of the Toronto Port Authority, which oversees the operations of the airport, said, "We will facilitate the discussions to a successful conclusion as requested and appropriate to the parties' needs."

2. Calgary mayor defends airline tickets to Toronto from architecture firm

TORONTO - Mayor Naheed Nenshi of Calgary is defending his decision to allow a private architecture firm to pay for his airfare to Toronto, saying it saves taxpayers money as he spends a week promoting Calgary in Canada's biggest city.

But allowing a company to pick up the airfare is "significant error in political judgment," according to one councillor, who said the optics are no different than a controversial trip to Monaco that led to the recent resignation of the CEO of Enmax, Calgary's city-owned electrical utility.

The airfare to Toronto and back to Calgary was economy class and cost $721.50. It was paid for by Kasian, an architecture firm with offices in Toronto and Calgary.

It's also a company that regularly brings proposals to the Calgary Planning Commission, according to one councillor who sits on panel.

Councillor Gord Lowe also drew comparisons to the recent disclosure that former Enmax CEO Gary Holden took a trip to Monaco that was paid for by a company doing business with the utility. That trip, along with a series of other distractions, led to Holden's resignation.

"The quantum and the circumstance is different, but the optic result is identical," Lowe said.

But Nenshi said he doesn't consider his airfare a gift, and has made a point of disclosing it.

"When Kasian invited me to come out for a function for architects and designers in Toronto, I said I wasn't comfortable with the taxpayer paying for such a thing," Nenshi said in an interview. "And when they offered to fly me out, I thought this is an opportunity for me to do some things that are very good for Calgary, and save the city money."

Nenshi now says he will repay the $720 ticket if voters have a problem with it.

Some councillors claim the mayor should have the ticket covered by the city's travel fund if he was in Toronto on official business.

3. WestJet, Delta connect on partnership deal

CALGARY—WestJet continues to partner with major U.S. airlines and that will make life a little bit easier for Canadians flying in North America.

On Monday, WestJet announced an interline partnership with Delta that will allow its passengers to easily connect with flights within the Atlanta-based airline’s route network. Customers of either airline can now travel over connecting flights on one ticket, get boarding passes for all flight legs at check-in and tag bags through to their final destination, Calgary-based WestJet said in a statement Monday.

An interline deal is different from a codeshare, which allows airlines to sell seats on each other’s planes using their designated codes. Under such an agreement, airlines will share the revenue. WestJet has interline agreements with several airlines, including one signed with American Airlines last fall, and said it hopes to turn such pacts into codeshares in the future.

The interline pact with Delta will be in effect at more than 25 Canadian and U.S. gateways.

Analyst Cameron Doerksen of Montreal-based National Bank Financial said the Delta deal will take time to pay off for WestJet. But in a note to clients he wrote that the interline agreements with American and Delta gives WestJet “two strong sources of inbound U.S. travellers.”

“Both American and Delta have extensive U.S. networks (along with large international networks) with a strong presence in key business markets, which are not well served by WestJet currently.”

He added that the agreement will take “several years to become more meaningful financial contributors for WestJet.”

On the international front, WestJet has an interline deal with British Airways, and codeshare deals with Air France-KLM and Hong Kong-based Cathay Pacific. Air Canada, WestJet’s main competitor, has interline agreements with 88 carriers and codeshare agreements with more than 20.

Interline and codeshare agreements will help WestJet to expand its market reach, since its fleet of Boeing 737 aircraft can’t make long-haul journeys to Europe or Asia.

Hugh Dunleavy, WestJet executive vice-president, strategy and planning said in a press release that the agreement means the airline will “continue to deliver on our strategic plan to establish partnerships with airlines from around the world.”
WestJet has signed an agreement with Delta that allows passengers from both airlines to more easily connect with flights within each other's network.

WestJet has signed an agreement with Delta that allows passengers from both airlines to more easily connect with flights within each other's network.

4. Air Canada is back in the black

Posts Q4, annual turnaround. Air-traffic gains were led by 23% increase in Pacific service, finance exec says

MONTREAL - Air Canada returned to profitability last year and said Thursday it faces a much-improved outlook, notably a strong comeback in business travel that augurs well for a general economic recovery.

But the Montreal-based carrier also faces uncertainty, notably the start of negotiation of four separate collective agreements covering the near-totality of its workforce of 23,000 and volatile fuel prices, a major airline expense.

The carrier posted earnings of $134 million in the last quarter, compared with a loss of $56 million in the 2009 quarter, helped by currency exchange gains.

In 2010, Air Canada made a net profit of $107 million, compared with a loss of $24 million in 2009.

In a teleconference call, airline president Calin Rovinescu called the $1.38-billion 2010 earnings -before taxes, interest, depreciation and amortization -"the highest in Air Canada's history."

"We're extremely pleased," he said.

"That represents a $707-million improvement over 2009."

Passenger revenues were up 11 per cent in the last quarter, 40 per cent of that - or $88 million -coming from premium tickets, business or first-class travellers.

Chief financial officer Michael Rousseau said Air Canada traffic was up eight per cent in the last quarter, "led by a 23-per-cent increase in Pacific services."

Air Canada has hedged 24 per cent of its expected fuel consumption this year at an average price of $94 U.S. a barrel, meaning that it's guaranteed to pay no more than that for about a quarter of its fuel, even if prices go beyond $94. And yield -of the profitability of a flight -has also risen.

But Rovinescu and Rousseau would not be pinned down on whether the carrier planned to increase ticket prices, particularly if oil prices jump far above their current level of around $86 a barrel.

David Tyerman, an analyst with Toronto brokerage Canaccord Genuity, said the swing factor on whether he ups his estimate on the company for this year is the price of tickets.

"They're on the right track," he said, and did right by its hedging program.

But he noted that one day earlier, rival WestJet Airlines Ltd. was more precise, telling analysts and the media that it did not expect to have to raise prices again this year after recent hikes.

"Ticket prices will determine" whether he will revise his Air Canada share price outlook from the current $9.25, Tyerman said.

As for union bargaining, he said that Air Canada will have to increase wages, but would have to receive productivity concessions as well, notably from pilots who work significantly fewer hours than their counterparts at WestJet.

In a conciliatory gesture, Rovinescu said Air Canada has earmarked $27 million in equity payments to its 23,000 employees, a one-time outlay.

But Marcel St. Jean was neither conciliatory nor encouraging.

"I heard today that the company did well last year. Now they owe us money," he said.

St. Jean, presidentof local 1751 of the International Association of Machinists and Aerospace Workers that represents about 12,000 ticket agents, baggage handlers and ramp workers, said that despite his contract expiring on April 30, "we can't even start negotiating until we clear up the mess with Aveos." He was referring to about 5,000 Air Canada maintenance employees transitioning to Aveos, the aircraft maintenance and repair division that Air Canada spun off as a separate entity.

"Air Canada won't even give us the list of the people who will be Aveos employees and how many will stay with Air Canada."

"So we have to take care of the transition fight first. And then the contract battle begins. It's going to be a tough one, make no mistake about it. Our members have not had a raise for 10 years, and in 2009, when we agreed to another 21-month wage freeze, we kept the right to go back retroactively."

"They owe us."

Investors seemed unimpressed by the carrier's performance. Shares dipped 3 cents on the day, closing at $3.39.
In 2010, Air Canada made a net profit of $107 million, compared with a loss of $24 million in 2009.