Profits at Canadian airlines to plunge: report

Wed Feb 25, 2009 11:01am EST
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TORONTO (Reuters) - Profits in Canada's airline industry are expected to drop by nearly 86 percent in 2009 as demand falls due to a lack of consumer and business confidence, the Conference Board of Canada said on Wednesday.

The country's airlines are expected to eke out a profit of C$106 million ($84.8 million) this year, the lowest level since 2004.

The number of visitors flying to Canada from the United States and beyond was in decline at the end of 2008, the board said, and domestic demand was not holding up either.

"The factors shaping the outlook for air transportation industry have been turned upside down as a result of the rapid deterioration in economic conditions," Michael Burt, the board's associate director, said in a statement.

He said high oil prices, which recently accounted for as much as 40 percent of the industry's operating costs, have fallen by more than half since their peak last summer.

"But demand for domestic air travel, which was the mainstay of the industry, is now plummeting."

The only segment of the industry that continues to grow is Canadian outbound travel to non-U.S. destinations, the board said.

Profits are forecast to improve considerably in 2010, as the Vancouver Olympic Games and expected economic recovery boost demand.

Canada's biggest airline, Air Canada, reported a bigger than expected fourth-quarter loss earlier this month. The country's No. 2 carrier, WestJet Airlines Ltd, reported a 46 percent drop in quarterly earnings.

($1=$1.25 Canadian)

(Reporting by John McCrank; Editing by Peter Galloway)