Air Canada has $354 million Q1 operating loss; grounds planes, cuts routes DAVID PADDON Canadian Press Tuesday, May 13, 2003 MONTREAL (CP) - Air Canada's operating loss more than doubled in the first quarter to $354 million and the insolvent airline said Tuesday it's grounding 40 planes and cutting service to several U.S. and foreign cities as it copes with falling revenues caused by the Iraq war and the SARS crisis. In a highly unusual move, Air Canada also released operating results for the month of April, when it was hurt not only by its financial woes but by an outbreak of severe acute respiratory syndrome that discouraged many people from flying to destinations served by the airline. Air Canada said it lost more than $125 million in revenues from the SARS outbreak in April, resulting in a $152 million operating loss for the month - $123 million worse than the same 2002 month. For the 2002 first quarter, Air Canada lost $160 million. The carrier, which is restructuring under bankruptcy protection, said it lost just over $5 million a day last month and was hurt more than any other airline outside Asia by the SARS epidemic. "I do not expect international travel demand to Canada to recover in the near term," Air Canada president and CEO Robert Milton said in a statement after stock markets closed. "The terrible revenue environment we are now facing with SARS immediately after the war with Iraq necessitates drastic action to survive what is expected to be one of our weakest second and third quarters in history." To cut costs, the Montreal airline plans to: - Reduce overall capacity by 17 per cent for June, July and, on a preliminary basis, in August. The three months are usually the busiest and most lucrative period for Canadian airlines. - Temporarily suspend service between Toronto and the U.S. cities of Kansas City, New Orleans and St. Louis until Labour Day in September. - Suspend flights until the summer 2004 on the following routes: Calgary-Chicago; Montreal-Atlanta; Montreal-San Francisco; Toronto-San Diego; Toronto-Tokyo/Narita; Vancouver-Washington/Dulles and Vancouver-Nagoya, Japan. - Indefinitely suspend flights to Dayton, Ohio and Grand Rapids. Mich. - Ground about 40 aircraft at the main carrier and its regional Jazz subsidiary. Air Canada operates about 350 planes in its fleet, including 120 smaller aircraft at Jazz. "SARS will clearly have a sustained impact in every affected area of the world and has already had a ruinous effect on our summer 2003," Milton said. The bleak financial results "underscores the urgency" with which the airline must restructure under the Companies Creditors' Arrangement Act, he said. "However, the steps announced today will not be sufficient to stem the losses and immediate cost reduction is required in all areas," he said. Air Canada said April 30 it needs to improve its annual operating results by $2.4 billion if it is to survive after emerging from bankruptcy protection as a smaller, leaner airline. Unions representing nearly 40,000 employees - including about 5,000 at its Jazz regional subsidiary - have been asked to help the airline achieve some $770 million in wage and other concessions and about $400 million in benefit and pension reductions. Talks with the various unions are being held in Toronto this week with the help of an Ontario judge who has been assigned to speed up negotiations with the aim of coming to an agreement by May 15. Air Canada has said it hopes to emerge from bankruptcy protection by the end of this year, if not sooner. The airline didn't release its first-quarter revenues or net loss for the first quarter in the preliminary results. It said a more complete financial report will be issued later this month. However, it did issue audited financial results for 2002, saying it lost $828 million, or $6.89 a share for the year. Most of that occured in the fourth quarter, when Air Canada lost $764 million or $6.35 per share. Those losses were about $400 million larger than originally reported in preliminary results issued in early February and are the result of a special tax-related charge of about $400 million the airline said Tuesday it took in the period. In February, Air Canada's preliminary analysis said its 2002 net loss was $428 million, or $3.56 per share, and its fourth-quarter loss $364 million, or $3.02 per share. The huge difference between the preliminary and audited results was due to a review of the future value of an income tax asset - essentially credits that could have been used to offset future profits. Financial highlights of Air Canada's latest financial report, released Tuesday: First-quarter operating loss: $354 million, or an average of about $4 million a day in the January-March period. April operating loss: Estimated to be $$152 million, $123 million worse than April, 2002. 2002 loss: $828 million, compared with a net loss of $1,3 billion in 2001. For 2002 fourth quarter, net loss was $764 million, including tax-related writedown of $400 million. Impact of SARS: Medical outbreak reduced April revenues by estimated $125 million. Travel bookings for May, June, July: Down 20 to 25 per cent, year over year. Planes grounded: Air Canada is grounding 40 aircraft, including wide-body and narrow-body aircraft at mainline carrier, some turbo-prop aircraft at Air Canada's regional Jazz unit. Schedule cuts announced Tuesday in wake of mounting losses: - Overall capacity to be trimmed 17 per cent, year over year, in June, July and possibly August. - Routes to Asia, where travel demand has been impacted by SARS, to be cut 60 per cent starting in June. Transborder routes to be cut 25 per cent. - Service from Toronto to St. Louis, New Orleans and Kansas City suspended until Labour Day. - Service suspended until summer 2004 on: Calgary-Chicago, Montreal-Atlanta, Montreal-San Francisco, Toronto-San Diego, Toronto-Tokyo (Narita airport), Vancouver-Washington (Dulles airport), Vancouver-Nagoya. - Service to Dayton, Ohio, and Grand Rapids, Mich., suspended indefinitely. *************************************************** The owner of Roger's Trinbago Site/TnTisland.com Roj (Roger James) escape email mailto:ejames@xxxxxxxxx Trinbago site: www.tntisland.com Carib Brass Ctn site www.tntisland.com/caribbeanbrassconnection/ Steel Expressions www.mts.net/~ejames/se/ Site of the Week: http://www.cso.gov.tt TnT Webdirectory: http://search.co.tt *********************************************************