MONTREAL, June 11 /CNW Telbec/ - Air Canada mainline flew 26.4 percent
fewer revenue passenger miles (RPMs) in May 2003 than in May 2002, according
to preliminary traffic figures. Capacity decreased by 21.5 percent, resulting
in a load factor of 71.6 percent, compared to 76.4 percent in May 2002; a
decrease of 4.8 percentage points. Jazz, Air Canada`s regional airline
subsidiary, flew 9.5 percent fewer revenue passenger miles (RPMs) in May 2003
than in May 2002, according to preliminary traffic figures. Capacity decreased
by 18.1 percent, resulting in a load factor of 60.6 percent, compared to
54.8 percent in May 2002; an increase of 5.8 percentage points.
Following on a $125 million negative impact in April due to SARS, the
revenue shortfall has deteriorated by more than $200 million year over year
for May with another comparable shortfall expected for June. Most of the
deterioration in May revenues can be attributed to SARS which has exacerbated
an already permanently changed revenue environment for North American carriers
in particular. Traffic on Asian routes is down 68 per cent and Toronto
enplanements are down 22 per cent for the month. Additionally overall domestic
traffic has been suppressed as normal international traffic flows connecting
to Air Canada`s domestic system are down considerably. The airline is
experiencing an unprecedented directional imbalance in business traffic at its
main hub with significantly more passengers originating in Toronto than from
other cities destined for Toronto. Corporate policies directing business
travellers to avoid Toronto and a general avoidance of Toronto as a connecting
point are ongoing factors.
“As can be seen from our results, the SARS outbreak continues to have a
major negative impact on traffic, not only on our Asian routes but on our
entire network, and in particular, our main hub at Toronto,” said Robert
Milton, President and Chief Executive Officer. “Given the ongoing concerns
over the outbreaks in Toronto, other than for a few Asian Pacific carriers,
SARS is proving more devastating to Air Canada than any other airline
worldwide. Advance international bookings for the summer are weak and we
expect that the entire Canadian tourism industry is under similar pressure.
International travellers are avoiding Canada in general, linking the SARS
outbreaks to the entire country rather than to Toronto where it has been
contained,” he said.
“We currently expect the 2003 year over year revenue shortfall to be
significantly in excess of $1 billion with no expectation of meaningful
recovery before the third quarter of 2004,” said Mr. Milton.
At a meeting of its Board of Directors today the Board reviewed the
Company`s current restructuring plan, its May operating results and the
continuing and forecast deterioration in the revenue environment.
Elements of the restructuring plan include:
- Fleet restructuring: downsize current fleet by at least 40 aircraft
and introduce a 70-110 seat regional jet aircraft fleet as previously
announced. - Product strategy: re-position the airline to provide high frequency,
quality, affordable air service. - Lowering operating costs: reduce annual operating costs by at least
$2.1 billion, inclusive of annual labour cost savings equal to $1.1 billion. - Deleveraging Air Canada: significantly reduce the debt level of Air
Canada. - Enhanced liquidity: raise new equity and debt financing currently
estimated to be $1.35 billion in order to ensure the minimum level of
liquidity for a successful restructuring.
The Board approved a plan to seek the debt and equity financing required
to fund a successful emergence from CCAA proceedings. In such circumstances,
it is highly likely that a substantial portion of the company`s unsecured debt
will be converted to new equity and that there will not be any meaningful
recovery to existing equity of the Company.
This discussion contains certain forward-looking statements, which
involve a number of risks and uncertainties. As a result of many factors
including acts or potential acts of terrorism, international conflicts,
government regulations and government mandated restrictions on operations
and pricing, fuel prices, industry restructuring, labour negotiations, the economic environment in general including foreign exchange and interest rates, the airline competitive and pricing environment, industry capacity decisions and new entrants as well as external events, actual
results could differ from expected results and the differences could be material.