TRANSPORTATION REPORTER
The erosion in Air Canada's business-class revenue is becoming less severe, sparking hope that the travel market is finally on the mend.
"The worst of the worst seems to be behind us," Air Canada chief executive officer Calin Rovinescu said during a conference call yesterday, after announcing a profitable third quarter due to foreign-exchange gains. "We're seeing sprouts of green coming up from the earth. "
In the third quarter, Canada's largest carrier saw its revenue from premium travellers decrease 16 per cent from the same period in 2008, marking an improvement from the 30-per-cent decline for the second quarter.
The airline was able to lure back some corporate travellers in the third quarter after introducing a lower-priced ticket for its "Executive Class" category earlier this year. The reduced fares in the premium cabin carry restrictions such as advance purchase and minimum stay periods.
In combatting weak travel demand, Montreal-based Air Canada has spruced up service in business class, offering more choices for meals and new amenity kits.
Mr. Rovinescu expects corporate travel budgets to gradually loosen up, but cautioned that it could take until mid-2011 before there is full recovery.
British Airways PLC is also seeing smaller declines in traffic, part of an industry trend. But the International Air Transport Association noted that global carriers lost a combined $6-billion (U.S.) in the first half of this year, and the industry is on track to lose $11-billion in 2009.
IATA estimates that average premium fares globally in July slumped 18 per cent, compared with the same month last year, while economy ticket prices fell 14 per cent.
In the latest quarter, Air Canada's operating profit fell 39 per cent to $68-million (Canadian), while revenue slid 13 per cent to $2.67-billion, including an estimated $10-million reduction due to the H1N1 influenza outbreak.
The company's operating loss in the first nine months soared to $233-million, compared with an $18-million loss for the same period last year. In July, the carrier lined up $1-billion in financing and cut costs, avoiding filing for bankruptcy protection.
Robert Kokonis, president of airline consulting firm AirTrav Inc., said Air Canada's third-quarter unit revenue - a key industry measure stated in revenue per available seat mile - fell 10.2 per cent, compared with WestJet Airlines Ltd.'s steeper drop of 15.5 per cent.
Air Canada is paying more attention to the eastern triangle of Toronto, Ottawa and Montreal, where three-year-old Porter Airlines Inc. has been making inroads.
While Air Canada operates from Toronto's Pearson International Airport, privately owned Porter is based at Toronto City Centre Airport, located on an island near the city's downtown business core.
Mr. Rovinescu said he wants regional carrier Jazz, which flies on behalf of Air Canada, to return to the island airport in 2010, when Porter's "exclusivity arrangements" expire.
AIR CANADA (AC.B)
Close: $1.16, up 2¢
*****
Air Canada
Q3 / 2009 / 2008
Profit / $277-million / ($132-million)
EPS / $2.44 / ($1.32)
Revenue / $2.67-billion /$3.07-billion
Source : Company reports