COM­PE­TI­TION HEATS UP

Low-cost com­peti­tors to get a leg up by govern­ment fast-track­ing new guide­lines

Toronto Star - - SMART MONEY - ROSS MAROWITS THE CANA­DIAN PRESS

Air Canada speaks out against Ot­tawa’s de­ci­sion help­ing low-cost car­ri­ers,

MON­TREAL— Air Canada says it is not afraid of com­pe­ti­tion from new Cana­dian low-cost air­lines, but is op­posed to Ot­tawa’s de­ci­sion to fast­track new for­eign own­er­ship rules for two po­ten­tial ri­vals.

“If there is a process to change the laws, to change re­stric­tions, then we look for­ward to ev­ery­body to ben­e­fit within the same time frame,” CEO Calin Rovi­nescu said Mon­day af­ter the air­line smashed an­a­lyst fore­casts with large gains in third-quar­ter profit and rev­enue.

Fed­eral Trans­port Min­is­ter Marc Garneau an­nounced last week that Ot­tawa plans to raise the for­eign own­er­ship cap for air­lines to 49 per cent from 25 per cent in a bid to spur com­pe­ti­tion and lower fares.

Un­til the leg­is­la­tion is changed, the min­is­ter said he would grant ex­emp­tions that will al­low as­pir­ing dis­count air­lines Canada Jet­lines and En­er­jet to land more in­ter­na­tional in­vestors.

Canada Jet­lines said the move will al­low the Van­cou­ver-based com­pany to lock up in­vestors so it can launch ser­vice next sum­mer, while Calgary-based En­er­jet said it plans to team up with Ari­zona’s Indigo Part­ners to fast-track de­vel­op­ment of its low-cost ser­vice.

Rovi­nescu said Air Canada al­ready faces low-cost com­pe­ti­tion in many mar­kets.

In Canada, it squares off against WestJet Air­lines and Transat AT, along with other providers such as Sun­wing.

With its Rouge ser­vice, he said the air­line has a tool that can be de­ployed for longer haul flights — in­clud­ing in­side Canada — that is more cost com­pet­i­tive.

Air Canada said it is study­ing the govern­ment’s pro­posed changes, but like WestJet, it wants ac­tion to re­duce other costs like air­port rents and re­lated charges, se­cu­rity sur­charges and fuel taxes.

Rovi­nescu added that any move by Ot­tawa to pri­va­tize Cana­dian air- ports should re­duce costs to air­lines that can be passed on to trav­ellers.

The Mon­treal-based air­line earned $768 mil­lion, or $2.74 per di­luted share, dur­ing the pe­riod ended Sept. 30, up from $437 mil­lion, or $1.48 per di­luted share, a year ago, de­spite feel­ing com­pet­i­tive pres­sure on flights this sum­mer to Eu­rope.

On an ad­justed ba­sis, the air­line had $821 mil­lion in prof­its, or $2.93 per share, com­pared with $734 mil­lion, or $2.50, a year ago. The air­line had $4.45 bil­lion in quar­terly rev­enue, com­pared with $4.02 bil­lion dur­ing the same pe­riod last year.

Air Canada was ex­pected to earn $2.55 per di­luted share in earn­ings on $4.29 bil­lion of rev­enues, ac­cord­ing to an­a­lysts polled by Thom­son Reuters.

MARCUS OLENIUK/TORONTO STAR FILE PHOTO

Air Canada re­ported earn­ings of $768 mil­lion dur­ing the pe­riod ended Sept. 30, up from $437 mil­lion in the same pe­riod a year ear­lier.

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