Air Canada ready to compete with newcomers: CEO
Airline reports record Q3 profit as total capacity jumps 20.9%
Air Canada’s record third-quarter results demonstrate the airline is more competitive than ever and ready to tackle newcomers as the federal government eases regulations for two prospective ultralow-cost carriers, the company’s chief executive said Monday.
“We’re familiar with low-cost competition, and whether people put the letter ‘U’ in front of it or not, we expect to be able to compete profitably,” Calin Rovinescu said on a conference call, referring to the “ultra” in ultra-low-cost carrier, or ULCC. This is a no-frills business model that keeps fares low by charging for extras such as carry-on bags and reserved seats.
“We expect to be able to compete better than we ever have in the past,” he added.
Ottawa said last week it will immediately exempt two aspiring ULCCs from existing foreign ownership limits. Under the exemption, Enerjet and Canada Jetlines Ltd. will be able to sell up to 49 per cent of their shares to foreign investors, up from 25 per cent previously. Both companies said this should allow them to begin flying relatively soon, with Jetlines targeting a launch date of this coming summer.
Transport Minister Marc Garneau also said he’ll pursue legislation to permanently raise the foreign ownership limit to 49 per cent for all Canadian carriers, including Air Canada and WestJet Airlines Ltd.
Rovinescu said Rouge, the lower-cost leisure carrier Air Canada launched in mid-2013, will help it compete with any new entrants.
“Having built Rouge, we now have a tool that is much more costcompetitive and we feel that especially in some of the longer-haul missions, including inside Canada, Rouge could well be deployed at the right time to be competitive as needed,” he said.
Air Canada grew its total capacity by 20.9 per cent in the third quarter and the vast majority of that capacity increase — 92 per cent — was on international routes. Air Canada launched more than 20 new international and U.S. transborder routes in the summer.
Traffic in the quarter grew 19 per cent compared with the previous year, including a 27.9 per cent spike in international-to-international passengers connecting via Canada.
“Our internal analysis shows we gained significant market share from various competitors, which bodes well for our long-term market position,” said Ben Smith, Air Canada’s president of passenger airlines.
Overall, Air Canada reported record adjusted profit of $821 million or $2.93 per share, up 12 per cent from a year ago and well ahead of the $2.58 expected by analysts. Shares rose 7.45 per cent Monday to close at $12.83. System passenger revenues rose 10.5 per cent to a record $4.1 billion.
“The Q3 results were a further confirmation to us that management’s growth plan is executing very well,” RBC analyst Walter Spracklin wrote in a note to clients.