August 8, 2012 / 10:13 AM / in 6 years

Air Canada oper profit falls on labor trouble

(Reuters) - Air Canada ACb.TO said operating profit fell 14 percent for the second quarter as labor disruptions and closure of its plane maintenance contractor weighed on the results.

Canada’s largest airline, which competes with WestJet Airlines (WJA.TO), recently sealed labor agreements with all its big unions after more than a year of fractious labor relations.

It won key union support for its bid for more relief on payments to erase its pension fund deficit, which doubled to C$4.4 billion in 2011.

Air Canada slightly raised the lower end of the forecast range for full-year system capacity. It now expects system capacity to increase 0.5-1.5 percent.

The operating income in the quarter fell to C$63 million ($63.2 million) from C$73 million a year earlier.

The net loss widened to C$96 million, or 35 Canadian cents per share, from C$46 million, or 17 Canadian cents per share, a year earlier.

On an adjusted basis, the airline reported a net loss of 5 Canadian cents per share.

The carrier estimates the labor disruptions and the closure its plane maintenance contractor have shaved off 12 Canadian cents to 17 Canadian cents from its earnings per share in the quarter.

Aveos Fleet Performance Inc, once the airline’s maintenance division, halted operations in March and laid off roughly 2,600 workers, most of whom were employed at maintenance centers in the cities of Montreal, Winnipeg and Vancouver.

Air Canada said the closure reduced its capacity.

“We continued to effectively manage capacity with a load factor of 83.5 percent in the quarter,” CEO Calin Rovinescu said in a statement.

Operating expenses rose 3 percent, mainly due to increases in wages, salaries and benefits, aircraft maintenance, capacity purchase costs and other expenses, the airline said.

Operating revenue rose 2 percent to C$2.99 billion.

Analysts on average had expected a loss of 1 Canadian cent per share on revenue of C$3.02 billion, according to Thomson Reuters I/B/E/S.

Passenger revenue per available seat mile (RASM), an industry performance benchmark, rose 2 percent.

“We see the results as slightly negative due to the softer-than-expected RASM,” said analyst Fadi Chamoun of BMO Capital Markets.

Costs per available seat mile, or CASM, increased little more than 2 percent in the quarter. Excluding fuel expense and the cost of ground packages at Air Canada Vacations, CASM rose 3.6 percent.

The more heavily traded “B” shares of Air Canada closed at C$1.15 on Tuesday on the Toronto Stock Exchange.

Reporting By Nicole Mordant in Vancouver and Bhaswati Mukhopadhyay in Bangalore; Editing by Don Sebastian

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