Air Canada
TSE (AC)
Take a peek at earnings...
Air Canada responds to debt plan; year-end results
Air Canada TSE (AC)
Shares issued 120,224,421 Feb 2 close $9.80
Ms. Nicole Couture-Simard reports
In response to today's announcement in Stockwatch by Canadian Airlines of a
debt restructuring plan, including a temporary payment moratorium on its
debt and aircraft lease facilities, Air Canada is issuing the following
statement:
Customers and employees can take assurance from the fact that, since it
began the process of acquiring Canadian Airlines, Air Canada has
consistently committed itself to protecting the interests of both customers
and employees of Air Canada, Canadian Airlines and their wholly owned
subsidiaries, and will continue to do so.
Mr. Robert Milton reports
Air Canada has realized record operating income of $503-million for the
year ended Dec. 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 with a loss of $16-million, or
10 cents 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 40
cents 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 toward 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 work force 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 with
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 owing 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:
Operating revenues for 1999 increased $314-million, or 5 per cent, compared
with 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 with 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 totalled $116-million, $57-million below 1998. Net
interest expense declined $20-million owing in large part to favourable
currency movements. Gains on sales of investments and other assets amounted
to $57-million, as compared with $30-million 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 three retired Boeing 747-200 and six
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 six
billion Japanese yen of Air Canada's perpetual debt. Deferred foreign
exchange was lower owing to gains of $13-million from the restructuring of
eight aircraft leases in 1999.
Removing the estimated 1998 strike impact and major non-recurring
non-operating and tax-related items in both years, pretax income improved
$141-million and net income rose $70-million, or 38 cents per share, fully
diluted as compared with 1998.
Cash flow and balance sheet
Passenger revenues rose $122-million, 10 per cent on a 7-per-cent increase
in ASM capacity. Passenger traffic was up 6 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 totalled $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 two 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,
pretax income in the quarter would have been $77-million higher than in
1998 and the net income greater by $46-million, or 26 cents 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 Corp. 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 Corp.
for approximately $59-million. At the same time, AMR Corp. 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 Corp. providing approximately
$60-million of the financing.
CONSOLIDATED STATEMENT OF OPERATIONS
Three months ended Dec. 31
(in millions of dollars)
1999 1998
Operating revenues
Passenger $1,383 $1,261
Cargo 110 102
Other 156 132
----- -----
1,649 1,495
----- -----
Operating expenses
Salaries and wages 402 357
Benefits 37 45
Aircraft fuel 178 170
Depreciation,
amortization and
obsolescence 82 76
Commissions 99 112
Food, beverages and
supplies 66 65
Aircraft maintenance,
materials and
supplies 97 79
Airport and
navigation fees 124 103
Aircraft rent 133 121
Customer maintenance
materials 14 16
Other 326 352
----- -----
1,558 1,496
----- -----
Operating income
(loss) 91 (1)
Non-operating
income (expense)
Net interest expense (34) (46)
Amortization of
deferred foreign
exchange (7) (12)
Gain on sale of
investments and
other assets 14 16
Other (28) (1)
----- -----
(55) (43)
----- -----
Income (loss) before
income taxes 36 (44)
Recovery of
(provision for)
income tax (23) 14
Recovery of prior
year's income tax
benefits previously
not recorded - 10
----- -----
Income (loss) for
the period $ 13 $ (20)
===== =====
Earnings (loss)
per share 8 cents (11 cents)
CONSOLIDATED STATEMENT OF OPERATIONS
12 months ended Dec. 31
(in millions of dollars)
1999 1998
Operating revenues
Passenger $5,520 $4,977
Cargo 387 369
Other 602 586
----- -----
6,509 5,932
----- -----
Operating expenses
Salaries and wages 1,503 1,363
Benefits 195 210
Aircraft fuel 622 657
Depreciation,
amortization and
obsolescence 311 292
Commissions 420 464
Food, beverages and
supplies 264 252
Aircraft maintenance,
materials and
supplies 334 318
Airport and
navigation fees 492 375
Aircraft rent 513 474
Customer maintenance
materials 78 76
Other 1,274 1,307
----- -----
6,006 5,788
----- -----
Operating income
(loss) 503 144
Non-operating
income (expense)
Net interest expense (154) (174)
Amortization of
deferred foreign
exchange (18) (32)
Gain on sale of
investments and
other assets 57 30
Other (1) 3
----- -----
(116) (173)
----- -----
Income (loss) before
income taxes 387 (29)
Recovery of
(provision for)
income tax (184) 3
Recovery of prior
year's income tax
benefits previously
not recorded 10 10
----- -----
Income (loss) for
the period $ 213 $ (16)
===== =====
Earnings (loss)
per share $1.16 (10 cents)
See also:
aircanada.ca |
