Air Canada posts bigger than expected loss

Thu Feb 9, 2012 5:20pm EST
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By Susan Taylor

(Reuters) - Struggling with higher fuel and maintenance costs, Air Canada reported a bigger than expected quarterly loss on Thursday, disappointing investors in the wake of strong performances from fellow Canadian and U.S. airlines.

Revenue growth did not keep pace with surging operating costs, Canada's biggest airline said, and its battered stock fell more than 12 percent to close at C$1.15 on Thursday, contributing to a full-year plunge of nearly 65 percent.

"The market is worried about the long-term implications," said independent airline consultant Robert Kokonis. "Why can this company not make money on a sustained basis where other carriers can?"

Canada's biggest airline skidded to a fourth-quarter adjusted loss of 64 Canadian cents a share, worse than the year-earlier loss of 17 Canadian cents and well off analyst expectations of a 49 Canadian cent per share loss.

Unlike its better-performing rivals, Air Canada is saddled with higher costs that spring from richer salaries, benefit and pension plans, said Morningstar analyst Neal Dihora.

"It's the same as all the other legacy carriers we talk about around the world," said Dihora.

"We're in an environment where we have free range for the low-cost carriers to basically pound on these guys and they have a lower cost structure because they ... understood that the business wasn't going to work with the old-school salaries and rules and benefit structure."

Air Canada's results come just one day after No. 2 WestJet Airlines topped analyst expectations as it stoked high-yield revenue growth and kept a tight lid on costs.   Continued...

<p>Air Canada aircraft are seen at Toronto Pearson International Airport, September 20, 2011. REUTERS/Mark Blinch</p>