April 3, 2009 / 12:57 AM / 9 years ago

REFILE-Air Canada likely to need court protection-analyst

(Refiles to fix spelling of analyst’s name in second and fifth paragraphs)

VANCOUVER, British Columbia, April 2 (Reuters) - Air Canada ACa.TO needs to make sharp cuts in its aircraft fleet and operations, and probably cannot do that without filing for bankruptcy protection, an analyst warned on Thursday.

Canada’s largest airline has spread it operations too thin, and should reduce its domestic routes by 57 percent and international routes by 53 percent, said Jacques Kavafian of Research Capital.

Speculation that the airline is planning another major restructuring has been running high since the surprise announcement this week that Calin Rovinescu was taking over as chief executive, following Montie Brewer’s resignation.

Rovinescu was Air Canada’s vice-president of corporate development and strategy from 2000 to 2004, a period that included its last restructuring under creditor protection. He subsequently co-founded investment bank Genuity Capital Markets

“Air Canada needs to cut over C$2 billion ($1.6 billion) from its fixed costs, and we believe such a drastic surgery can best be achieved in bankruptcy protection, given the large size of cuts required, and Mr Rovinescu is the right person for that,” Kavafian wrote in a research note.

Another analyst also suggested on Thursday that Air Canada might need to again seek protection, but said that will not be clear until the company reports its second-quarter results in early August.

“The key will be the extent to which it can cut costs and realize substantial fuel savings, and the extent to which passenger demand and price hold up during the peak summer travel season,” CanaccordAdams analyst Tom Varesh wrote in a report. (Reporting Allan Dowd; Editing by Rob Wilson)

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