Air Canada sees wider operating loss, shares plunge

Mon Apr 22, 2013 2:05pm EDT
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By Susan Taylor

TORONTO (Reuters) - Air Canada ACb.TO said on Monday it expects a wider operating loss in the first quarter, after weather-related flight cancellations, operational challenges and a sizeable impairment charge. Shares fell sharply.

Analysts said the preliminary results, which Canada's largest airline said it announced early so it could share the data with potential lenders, were weaker than they had expected and may suggest slowing revenue and earnings growth.

The Montreal-based airline's more heavily traded class B shares were down 12.7 percent at C$2.62 on the Toronto Stock Exchange, a modest recovery from an earlier fall of 18 percent.

Before the results, Air Canada stock was up some 250 percent in a year, making it vulnerable to bad news, RBC Capital Markets analyst Walter Spracklin said in a note which cut his stock price target to C$3 from C$4.

"This morning's unexpected profit warning is an example of this risk, with the lower-than-expected RASM (revenue per available seat mile) and yields certainly a cause for concern," Spracklin said.

Last week, he downgraded the stock to "sector perform" due to its lofty share price.

The airline, which is scheduled to report its results May 3, estimated first-quarter RASM growth at 1.1 percent. Spracklin said that lags his estimate of a 2.7 percent rise and suggests negative yield, versus his forecast of a 2 percent yield gain.

Air Canada, whose main domestic rival is WestJet Airlines Ltd (WJA.TO: Quote), expects a first-quarter operating loss of C$106 million ($103 million), deeper than a year-ago loss of C$91 million. The net loss is seen at C$260 million, versus a net loss of C$274 million in the same period last year.   Continued...

An Air Canada Boeing 777 painted in a 2010 Winter Olympic Games motive is unveiled in Vancouver, British Columbia July 8, 2009. REUTERS/Andy Clark