aircanada.ca
-
Release: February 2, 2000
AIR CANADA REPORTS 1999 RESULTS
HIGHLIGHTS
-
Record operating income of $503 million, up $359 million from 1998. Operating margin of 7.7 per cent, highest margin in 27 years. Net income of $213 million, up $229 million. Cash and unused credit facilities and commitments of over $1.1 billion. Record fourth quarter operating income of $91 million. Record fourth quarter operating margin of 5.5 per cent. Fuel hedging largely offset higher fuel prices in the fourth quarter MONTREAL - Air Canada today reported record operating income of $503 million for the year ended December 31, 1999, a $359 million improvement from 1998 and $135 million over 1997, its previous best year. Earnings were $213 million or $1.14 per share, fully diluted, compared to a loss of $16 million or $0.10 per share in 1998. The 1998 results were adversely affected by a pilot strike which grounded flying operations for 13 days in September. Removing the estimated impact of this strike, operating income improved $109 million or 28 per cent and net income increased $74 million or $0.40 per share, fully diluted. "In 1999, Air Canada achieved its highest operating income in the company?s 62 year history," said Robert A. Milton, President and Chief Executive Officer. "I am very proud of our employees and this excellent performance. It reflects our progress towards reaching industry leading levels of profitability, despite the challenge of thwarting a hostile takeover bid during the fourth quarter. "During the past year, we have successfully pursued a number of profitable revenue growth opportunities and cost containment measures resulting in an improvement in operating margin of 1.3 percentage points. Moreover, on-time performance improved consistently throughout the year to achieve a five-percentage point improvement over the previous year ? one of our best ever measurements of reliability. "We have emerged in 2000 as a financially solid company, with strong allies, a loyal and professional workforce and a clear strategic vision for the future. Our focus remains on creating shareholder value as we build a new stronger Air Canada for the benefit of all our stakeholders. "While a near term focus is the restructuring of Canadian?s debt, one of the key prerequisites to our eventual assumption of control of Canadian, the two carriers are proceeding with a realignment of their networks. The summer schedules to be announced in the coming weeks will reflect the resulting benefits to stakeholders. "The two carriers are moving fast to create a seamless travel experience for their customers. The degree and speed of integration will be guided by what is cost-efficient and practical ? by what is best not only for shareholders, but also by what is best for employees and customers. The participation of all stakeholders in this exciting process will result in the creation of the most profitable, efficient and competitive airline possible." Summary of Financial Results Operating revenues increased $577 million or 10 per cent as compared to 1998. Passenger revenues rose $543 million or 11 per cent on a 4 per cent increase in available seat mile (ASM) capacity. Revenue growth was recorded in all sectors particularly in transborder, domestic and Pacific markets. Yield per revenue passenger mile (RPM) grew 6 per cent and passenger revenue per available seat mile (RASM) rose 7 per cent. Operating expenses increased $218 million or 4 per cent over 1998. Major elements of the increase were labour expense which rose $140 million or 10 per cent and airport and navigation charges which grew $117 million or 31 per cent, the latter due mainly to higher Nav Canada charges. Fuel expense declined $35 million or 5 per cent reflecting improved fuel hedge results, partially offset by significantly higher fuel prices particularly in the second half of the year. Unit cost per ASM was unchanged from 1998, excluding subsidiaries. The 1998 pilot strike adversely affected the prior year?s operating income by an estimated $250 million, including a $249 million reduction to passenger revenues, a net $14 million reduction to cargo and other revenues and a $13 million decline in operating expense. In order to provide more meaningful analysis, the following information adjusts the prior year?s results for the estimated impact of this strike: 1999 operating revenues increased $314 million or 5 per cent compared to 1998. Passenger revenues rose $294 million or 6 per cent despite a 1 per cent decline in available seat mile (ASM) capacity. The growth in passenger yield per RPM and revenue per available seat mile continued to lead the North American industry with increases of 5 per cent and 7 per cent respectively compared to 1998. Operating expenses rose $205 million or 4 per cent. Unit cost per ASM increased 5 per cent, excluding subsidiaries. Removing the growth in airport and navigation charges, unit cost increased 3 per cent. Operating income improved $109 million and operating margin rose 1.3 percentage points. Non-operating expense totaled $116 million, $57 million below 1998. Net interest expense declined $20 million due in large part to favourable currency movements. Gains on sales of investments and other assets amounted to $57 million as compared to $30 million in 1998. The 1999 gains included $67 million on the sale of approximately 60 per cent of the Corporation?s interest in Equant N.V., partially offset by expense provisions of $12 million on future sale values of 3 retired Boeing 747-200 and 6 retired DC-9 aircraft. Included in other non-operating expense were costs of $43 million incurred mainly to defend against the failed hostile takeover bid as well as gains of $24 million on the purchase of 6 billion Japanese Yen of Air Canada?s perpetual debt. Deferred foreign exchange was lower due to gains of $13 million from the restructuring of 8 aircraft leases in 1999. Removing the estimated 1998 strike impact and major non-recurring non-operating and tax related items in both years, pre-tax income improved $141 million and net income rose $70 million or $0.38 per share, fully diluted as compared to 1998. Cash Flow and Balance Sheet In the fourth quarter, the Corporation completed its $1.1 billion issuer bid by purchasing 68.75 million Air Canada common and Class A non-voting shares or 36 per cent of outstanding shares at a price of $16.00 per share. In total, 41.67 million common shares and 27.08 million Class A non-voting shares were purchased. During the fourth quarter, total partner and other funding of over $700 million was concluded through the following agreements / facilities:
CIBC / Aeroplan commercial agreement extension $200 million
Issuance of Class A convertible non-voting preferred shares to a partnership formed by UAL Corporation and Deutsche Lufthansa AG 233 million
Issuance of convertible subordinated debentures to the Caisse de d‚p“t et placement du Qu‚bec 150 million
Financing from UAL Corporation relating to lease of 2 Airbus A330 aircraft 122 million
Cash and cash equivalents at December 31, 1999 were $521 million while unused credit facilities and financing commitments amounted to over $610 million. Fourth Quarter Results Air Canada posted record fourth quarter operating income of $91 million, a $92 million improvement from the 1998 quarter. Net income was $13 million or $0.08 per share, fully diluted as compared to a net loss of $20 million or $0.11 per share in 1998. Passenger revenues rose $122 million or 10 per cent on a 7 per cent increase in ASM capacity. Passenger traffic was up 5 per cent and yield per RPM rose 5 per cent over the 1998 quarter. Passenger revenue per ASM improved 2 per cent. Total operating revenues rose $154 million or 10 per cent while operating expenses increased $62 million or 4 per cent. Significantly higher fuel prices in the quarter were largely offset by improved fuel hedging results. Unit cost per ASM declined 4 per cent, excluding subsidiaries. Non-operating expense totaled $55 million in the quarter, up $12 million from 1998. Gains on sale of investments and other assets included $25 million from the sale of Equant N.V. shares, partially offset by provisions of $12 million on retired Boeing 747-200 and DC-9 aircraft, noted above. Other non-operating expense included $43 million of costs related mainly to the failed takeover bid as well as a gain of $7 million from the purchase of 2 billion Japanese yen perpetual debt. The lingering effects of the prior year?s pilot strike adversely affected operating income in the 1998 quarter by an estimated $38 million and net income by $22 million. Removing the estimated 1998 pilot strike impact and major non-recurring non-operating and tax related items in both years, pre-tax income in the quarter would have been $77 million higher than in 1998 and the net income greater by $46 million or $0.26 per share, fully diluted. Industry Restructuring In early January 2000, 853350 Alberta Ltd., a corporation in which Air Canada owns 10 per cent of the common shares, acquired approximately 82 per cent of the issued and outstanding shares of Canadian Airlines Corporation at a cost of $86 million as well as the convertible preferred shares of Canadian Airlines International Ltd., previously held by a subsidiary of AMR Corporation for approximately $59 million. At the same time, AMR Corporation relinquished all rights to its shareholdings in Canadian Airlines International Ltd. Also in January 2000, a $169 million lease financing transaction was completed for a third Airbus A330 with UAL Corporation providing approximately $60 million of the financing. |
