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8 passengers hurt by turbulence on Air Canada flight AC088, 21 sent to the hospital

Air Canada Boeing 777-333 ER C-FITL (msn 35256) YYC (Chris Sands). Image: 927231.

Air Canada (Montreal) issued this statement concerning passengers that were hurt by turbulence on flight AC088 from Shanghai to Toronto on December 30:

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Flight AC088, en route to Toronto from Shanghai , was diverted to Calgary on due to turbulence where it landed without incident at 15:23 MT (17:23 ET) on December 30. The Boeing 777-300 ER was carrying 332 passengers and 19 crew members.

Passengers and crew were immediately met by Air Canada teams and examined by medical personnel. Twenty-one passengers were transferred directly to local hospitals from the airport comprising eight with non-life threatening injuries and 13 for observation.

Air Canada is making arrangements to accommodate all passengers including those continuing on to Toronto .

Air Canada is cooperating fully with the Transportation Safety Board in its investigation of this incident.

Air Canada did not specify the exact location of the turbulence but it was likely to have occurred somewhere over northern Canada.

Read more from CNN: CLICK HERE

Copyright Photo: Chris Sands/AirlinersGallery.com. Boeing 777-333 ER C-FITL (msn 35256) lands at Calgary prior to the incident.

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Air Canada reports 3Q net income of GAAP C$815 million

Air Canada Boeing 777-333 ER C-FIUW (msn 35249) YYC (Chris Sands). Image: 927233.

Air Canada (Montreal) today reported record third quarter adjusted net income of $734 million (all amounts are in Canadian dollars) or $2.50 per diluted share compared to adjusted net income of $457 million or $1.55 per diluted share in the third quarter of 2014, an improvement of $277 million or approximately 61 per cent. EBITDAR (earnings before interest, taxes, depreciation, amortization and aircraft rent) amounted to $1,076 million compared to EBITDAR of $749 million in the same quarter in 2014, an increase of $327 million or approximately 44 per cent year-over-year.

On a GAAP basis, Air Canada reported record third quarter operating income of $815 million compared to operating income of $526 million, an improvement of $289 million or approximately 55 per cent from the third quarter of 2014. An operating margin of 20.3 per cent in the third quarter of 2015 reflected an improvement of 6.5 percentage points from the same quarter in 2014.

Read the full report: CLICK HERE

Copyright Photo: Chris Sands/AirlinersGallery.com. Boeing 777-333 ER C-FIUW (msn 35249) departs from Calgary.

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Air Canada has its best year ever, reports net income of $531 million

Air Canada (Montreal) recorded in 2014 its highest annual adjusted net income in the carrier’s 77-year history. The airline reported adjusted net income of $531 million (all amounts in Canadian dollars) or $1.81 per diluted share in 2014 versus adjusted net income of $340 million or $1.20 per diluted share in 2013, an increase of $191 million or 56.2 per cent or $0.61 per diluted share. Fourth quarter 2014 adjusted net income of $67 million or $0.23 per diluted share, an increase of $64 million or $0.22 per diluted share.

The airline today issued this financial statement:

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Air Canada today reported full year adjusted net income(1) of $531 million or $1.81 per diluted share compared to adjusted net income of $340 million or $1.20 per diluted share in 2013, an improvement of $191 million or $0.61 per diluted share. EBITDAR(1) (earnings before interest, taxes, depreciation, amortization and aircraft rent) amounted to $1.671 billion compared to EBITDAR (excluding the impact of benefit plan amendments) of $1.433 billion in 2013, an improvement of $238 million or 16.6 per cent. On a GAAP basis, Air Canada reported 2014 operating income of $815 million, an increase of $196 million or 31.7 per cent from 2013. The airline reported net income of $105 million or $0.34 per diluted share in 2014 compared to net income of $10 million or $0.02 per diluted share in 2013.

Full year Income Statement Highlights

In 2014, on capacity growth of 7.8 per cent, system passenger revenues of $11.804 billion increased $783 million or 7.1 per cent from 2013. The increase in system passenger revenues was mainly due to traffic growth of 8.5 per cent partly offset by a yield decline of 1.3 per cent. An increase in average stage length of 2.3 per cent versus 2013, reflecting international long-haul growth, had the effect of reducing yield by 1.3 percentage points. On a stage length adjusted basis, system yield was unchanged from 2013. Modest yield declines are an anticipated and natural consequence of the successful implementation of Air Canada’s business strategy to profitably increase long-haul international and leisure flying.

Passenger revenue per available seat mile (PRASM) decreased 0.6 per cent from 2013 as the lower yield was largely offset by a passenger load factor improvement of 0.6 percentage points. In 2014, system business cabin revenues increased $109 million or 4.9 per cent on yield growth.

In 2014, operating expenses of $12.457 billion increased $694 million or 6 per cent from 2013 on capacity growth of 7.8 per cent. The unfavourable impact of a weaker Canadian dollar on foreign currency denominated operating expenses (mainly U.S. dollars) in 2014, when compared to 2013, increased operating expenses by approximately $397 million.

Air Canada’s adjusted cost per available seat mile (adjusted CASM(1)), which excludes fuel expense, the cost of ground packages at Air Canada Vacations® and unusual items, decreased 2.6 per cent from 2013, in line with the 2.5 per cent to 3.5 per cent decrease projected in Air Canada’s news release dated November 6, 2014.

In 2014, Air Canada recorded operating income of $815 million compared to operating income of $619 million in 2013, an improvement of $196 million or 31.7 per cent. The airline recorded an operating margin of 6.1 per cent compared to an operating margin (excluding the impact of benefit plan amendments) of 4.3 per cent in 2013, an improvement of 1.8 percentage points.

Fourth Quarter Income Statement Highlights

In the fourth quarter of 2014, on capacity growth of 8.5 per cent, system passenger revenues of $2.755 billion increased $195 million or 7.6 per cent from the fourth quarter of 2013. The increase in system passenger revenues was due to traffic growth of 9.4 per cent partly offset by a yield decline of 1.9 per cent. An increase in average stage length of 2.2 per cent versus the fourth quarter of 2013 had the effect of reducing yield by 1.2 percentage points. On a stage length adjusted basis, system yield marginally declined 0.7 per cent year-over-year.

PRASM decreased 1.2 per cent from the same quarter in 2013 as the lower yield was partly offset by a passenger load factor improvement of 0.6 percentage points. In the fourth quarter of 2014, system business cabin revenues increased $28 million or 5.0 per cent on yield growth of 6.7 per cent partly offset by a decrease in traffic of 1.5 per cent.

In the fourth quarter of 2014, operating expenses of $2.998 billion increased $239 million or 9 per cent from the fourth quarter of 2013. The unfavourable impact of a weaker Canadian dollar on foreign currency denominated operating expenses (mainly U.S. dollars) in the fourth quarter of 2014, when compared to the fourth quarter of 2013, increased operating expenses by approximately $89 million.

Adjusted CASM was unchanged from the fourth quarter of 2013 versus the 1.0 per cent to 2.0 per cent decrease projected in Air Canada’s news release dated November 6, 2014. This difference was primarily due to higher than forecasted employee benefits expense mainly due to revised actuarial valuations related to pension and post-employment benefits, an increase in accruals related to employee profit sharing programs, the timing of maintenance events versus what was previously projected and, to a lesser extent, the impact of a weaker than anticipated Canadian dollar.

In the fourth quarter of 2014, Air Canada recorded operating income of $106 million compared to operating income of $135 million in the fourth quarter of 2013, a decrease of $29 million. In the fourth quarter of 2013, Air Canada recorded a reduction of $82 million in operating expenses related to benefit plan amendments while no such adjustment was recorded in the fourth quarter of 2014. Air Canada recorded an operating margin of 3.4 per cent compared to an operating margin (excluding the impact of benefit plan amendments) of 1.8 per cent in the fourth quarter of 2013, an improvement of 1.6 percentage points.

For the fourth quarter of 2014, adjusted net income of $67 million or $0.23 per diluted share increased $64 million or $0.22 per diluted share from the same quarter of 2013. The airline reported fourth quarter EBITDAR of $319 million compared to fourth quarter EBITDAR (excluding the impact of benefit plan amendments) of $277 million in 2013, an improvement of $42 million or 15.2 per cent.

Financial and Capital Management Highlights

At December 31, 2014, unrestricted liquidity (cash, short-term investments and undrawn lines of credit) amounted to $2.685 billion (December 31, 2013 – $2.364 billion). Air Canada’s principal objective in managing liquidity risk is to maintain a minimum unrestricted liquidity level of $1.7 billion.

At December 31, 2014, adjusted net debt(1) amounted to $5.132 billion, an increase of $781 million from December 31, 2013, mainly due to the purchase of six Boeing 787-8 and one Boeing 777 aircraft in 2014 and the unfavourable impact of a weaker Canadian dollar as at December 31, 2014 compared to December 31, 2013 on Air Canada’s foreign currency denominated debt (mainly U.S. dollars), which accounted for an increase of $365 million to long-term debt in 2014. The airline’s adjusted net debt to EBITDAR ratio was 3.1 at December 31, 2014 versus a ratio 3.0 at December 31, 2013. Air Canada uses this ratio to manage its financial leverage risk and its objective is to maintain the ratio below 3.5.

For the 12 months ended December 31, 2014, return on invested capital (ROIC(1)) was 12.1 per cent versus 10.5 per cent for the 12 months ended December 31, 2013. Air Canada’s goal remains to achieve a sustainable ROIC of 10 to 13 per cent.

Further to Air Canada’s foreign exchange risk management practices (which are more fully described in Air Canada’s 2014 MD&A), foreign denominated revenues essentially act as a natural hedge against U.S. dollar denominated non-fuel operating expenses. As such, net U.S. dollar operating expenses are largely attributable to the airline’s fuel purchases which are currently at a much lower cost in Canadian dollars despite the impact of a weaker Canadian dollar.

U.S. dollar currency derivatives and U.S. dollar cash reserves, which, as at December 31, 2014, amounted to US$2.292 billion and US$620 million, respectively, are employed to offset approximately 60 per cent of the net U.S. dollar currency exposure in 2015 and 2016. The currency derivatives enable Air Canada to purchase U.S. dollars at a weighted average price of C$1.0884 (subject to various option pricing features, such as knock-out terms and profit cap limitations). These derivatives and U.S. dollar cash reserves will be available to mitigate certain cash flow exposure from the currency movements in 2015; however the benefit of these hedging activities is recorded as a foreign exchange gain and not within operating income.

Pension

As at January 1, 2014, the aggregate solvency surplus in Air Canada’s domestic registered pension plans was $89 million. The next required valuations will be completed in the first half of 2015. Based on preliminary estimates, including actuarial assumptions, as at January 1, 2015, the aggregate solvency surplus in Air Canada’s domestic registered pension plans is projected to be $780 million.

In December 2013, the Government of Canada formally approved the Air Canada Pension Plan Funding Regulations, 2014 (the “2014 Regulations”) under the Pension Benefits Standards Act, 1985 in respect of special payments required to be made to amortize the deficit under Air Canada’s defined benefit plans applicable to the period between 2014 to 2020 inclusively, expiring December 31, 2020. Air Canada is permitted to opt out of the 2014 Regulations and have past service payments in respect of all Air Canada pension plans, collectively, determined in accordance with normal funding rules. Air Canada would consider opting out when the annual solvency deficit payments under normal funding rules, which are determined using deficit levels over three years, would be less than $200 million and when there would be a strong basis for confidence that the airline’s de-risking strategy would make a future significant deficit unlikely to re-occur. At December 31, 2014, approximately 72.5 per cent of the pension liabilities were matched with fixed income products to mitigate a significant portion of the interest rate (discount rate) risk.

In the event that Air Canada opts out of the 2014 Regulations, based on the normal funding rules and subject to the finalization of the preliminary estimate of the pension solvency surplus of $780 million at January 1, 2015, Air Canada’s pension solvency payment would be approximately $90 million in 2015.

Current Outlook

Capacity

Air Canada expects first quarter 2015 system ASM capacity, as measured by available seat miles (ASMs), to increase 8.5 to 9.5 per cent when compared to the first quarter of 2014, and to be comprised of an increase in the total number of seats dispatched (system) of 7.0 to 8.0 per cent and an increase in average stage length (system) (measured by ASMs divided by seats dispatched) of approximately 1.5 per cent when compared to the same quarter in 2014.

Air Canada continues to expect its full year 2015 system ASM capacity to increase by 9.0 to 10.0 per cent. For the full year 2015, Air Canada continues to expect an increase in the total number of seats dispatched (system) of 6.0 to 7.0 per cent when compared to the full year 2014 and average stage length (system) is expected to increase approximately 3.0 per cent year-over-year. Approximately 55 per cent of the 2015 forecasted capacity increase will be through the continued lower-cost growth of Air Canada rouge® while approximately 38 per cent of the capacity growth will be targeted to international markets operated by the mainline carrier.

Air Canada expects its full year 2015 domestic ASM capacity to increase 3.5 to 4.5 per cent (as opposed to the 4.0 to 5.0 per cent increase projected in Air Canada’s news release dated November 6, 2014) when compared to 2014, with a large part of the growth focused on the airline’s transcontinental services. The increase on transcontinental services is partly driven by the positioning of certain Boeing 777 and 787 aircraft at Air Canada’s major hubs in Toronto and Vancouver. Furthermore, in 2015, an overlap of the aircraft brought into the fleet to replace the exiting Embraer 190 aircraft is forecasted to account for approximately 30 per cent of the projected domestic capacity growth in 2015. This overlap is designed to better match capacity with expected 2015 summer season demand. For the full year 2015, Air Canada continues to expect an increase in the total number of seats dispatched (domestic) of 2.5 to 3.5 per cent while average stage length (domestic) is expected to increase approximately 1.0 per cent when compared to the full year 2014.

Adjusted CASM

For the first quarter of 2015, Air Canada expects adjusted CASM (which excludes fuel expense, the cost of ground packages at Air Canada Vacations and unusual items) to increase 0.5 to 1.5 per cent when compared to the first quarter of 2014. If the value of the Canadian dollar were at 2014 levels, the projected adjusted CASM for the first quarter of 2015 versus the first quarter of 2014 would reflect a decrease of 2.0 to 3.0 per cent.

For the full year 2015, Air Canada expects adjusted CASM to decrease 0.75 to 1.75 per cent from the full year 2014. If the value of the Canadian dollar were at 2014 levels, the projected adjusted CASM for the full year 2015 versus the full year 2014 would reflect a decrease of 3.75 to 4.75 per cent.

Major Assumptions

Air Canada’s outlook assumes annual Canadian GDP growth of 1.75 to 2.25 per cent for 2015. Air Canada also expects that the Canadian dollar will trade, on average, at C$1.25 per U.S. dollar in the first quarter of 2015 and for the full year 2015 and that the price of jet fuel will average 66 cents per litre for the first quarter of 2015 and 67 cents per litre for the full year 2015.

Copyright Photo: SPA/AirlinersGallery.com. Boeing 777-333 ER C-FNNU (msn 43249) approach the runway at London Heathrow Airport.

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Air Canada to become the launch customer of Boeing’s new landing gear exchange program

Boeing (Chicago, Seattle and Charleston) has announced that Air Canada (Montreal) is the launch customer for Boeing’s new landing gear exchange programs for 777-300 ER (Extended Range) and 777-200 LR (Longer Range) airframes.

Under the agreement, Air Canada will receive fully overhauled and certified landing gear shipsets for its fleet of 17 777-300 ERs and six 777-200 LRs during scheduled maintenance cycles. The terms of the agreement were not disclosed.

Boeing currently provides landing gear overhaul and exchange solutions to more than 80 customers on the MD-11, 717, Next-Generation 737, Boeing Business Jet, 747-400, 757-300, 767-300 ER and the 777-200 ER airframes. With a Boeing global network of repair service centers, airline customers receive certified landing gear support anywhere around the world. Boeing provides quick, reliable access to landing gear repair, exchanges and overhauls, which greatly reduces maintenance time and quickly returns airplanes to revenue service.

In addition to its Landing Gear Overhaul and Exchange Program, Boeing provides expendable, rotable, repairable and consumable parts to customers around the globe, giving them a competitive edge in their markets. Products and services include Boeing-proprietary, industry-standard and vendor-proprietary parts; leasing options; and repair and overhaul services.

Copyright Photo: SPA/AirlinersGallery.com. Air Canada’s Boeing 777-333 ER C-FNNW (msn 43250) departs from London (Heathrow).

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Air Canada and Air China sign a MOU for a revenue sharing joint venture

Air Canada (Montreal) and Air China Limited (Beijing) today (November 8) announced that the airlines have concluded a memorandum of understanding (MOU) setting out the main principles for a comprehensive revenue sharing joint venture providing for an enhanced partnership on routes between Canada and China which will stimulate traffic growth between the two countries.

The two airlines continued:

The joint venture will generate additional service and pricing benefits for consumers travelling between the two countries as well as provide for enhanced cooperation between the two carriers in the areas of sales, marketing and airport operations. The announcement was made in Beijing during an official visit to China by Canadian Prime Minister Stephen Harper, prior to a meeting of Asia-Pacific Economic Co-operation (APEC) member nations.

Subject to Air Canada and Air China making the necessary filings, obtaining competition and other regulatory approvals and finalizing documentation, the joint venture is expected to come into effect by the end of 2015.

Currently, Air China offers its customers codeshare flights operated by Air Canada between Vancouver and six Canadian cities (Edmonton, Calgary, Winnipeg, Toronto, Ottawa and Montreal) and Air Canada offers its customers codeshare flights operated by Air China between Beijing and six cities in China (Guangzhou, Chongqing, Chengdu, Shenyang, Wuhan and Xi’an).

Air Canada operates up to a total of 28 flights per week between Canada and China, from Toronto and Vancouver to and from Beijing and Shanghai. Air China operates up to 11 flights per week between Beijing and Vancouver.

Top Copyright Photo: SPA/AirlinersGallery.com. Air Canada’s Boeing 777-333 ER C-FIVS (msn 35784) climbs away from London (Heathrow).

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Bottom Copyright Photo: Boeing 777-39L B-2037 (msn 38677) of Air China taxies to the gate at Los Angeles International Airport.

Air Canada’s third quarter adjusted net income increases to $457 million ($400.9 million US), its best quarter ever, orders two more Boeing 777-300 ERs

Air Canada (Montreal) today reported third quarter adjusted net income of C$457 million ($400.9 million US) or $1.55 per diluted share compared to adjusted net income of C$365 million ($320.2 million US) or $1.29 per diluted share in the third quarter of 2013, an improvement of $92 million ($80.7 million US) or $0.26 per diluted share. EBITDAR(1) (earnings before interest, taxes, depreciation, amortization and aircraft rent) amounted to $749 million compared to EBITDAR of $626 million in the third quarter of 2013, an improvement of $123 million. On a GAAP basis, Air Canada reported operating income of $526 million, an increase of $110 million from the same quarter in 2013. The airline recorded net income of $323 million or $1.10 per diluted share in the third quarter of 2014 compared to a net income of $299 million or $1.05 per diluted share in the third quarter of 2013, an improvement of $24 million or $0.05 per diluted share.

“I am extremely pleased to report Air Canada’s best financial performance of any quarter in the Corporation’s 77-year history, surpassing previous records for adjusted net income, operating income and EBITDAR,” said Calin Rovinescu, President and Chief Executive Officer.

“Operating margin was 13.8 per cent, an increase of 1.8 percentage points over the previous year’s quarter, underscoring the effectiveness of our business transformation strategy. The recent tailwind provided by a reduction in fuel prices is a welcome development but we remain focused on further cost reductions to achieve sustainable profitability in this highly competitive industry environment. While foreign exchange rates and fuel prices have fluctuated since 2012, Air Canada remains on track to achieve the savings targeted when we announced our objective at our June 2013 Investors’ Day to achieve a 15 per cent CASM reduction from our 2012 baseline costs.

“The ratification of a ten-year agreement with our pilots provides a strong foundation to support long term profitable growth. With this additional stability and competitiveness, we are able to accelerate our fleet initiatives and capital programs with the acquisition of an additional two Boeing 777-300 ER aircraft. This will bring our Boeing 777 fleet to a total of 25 aircraft, all of which will be reconfigured to our new international cabin product standard now featured on the 787 Dreamliner aircraft entering our international fleet.

“In the third quarter, we continued to implement our commercial strategy focused on international growth and the strategic deployment of Air Canada rougeTM to compete more effectively in leisure markets. Together with the on-going renewal of the mainline fleet, we continue to build Toronto Pearson into a truly global hub with the successful launch in the quarter of new Tokyo/Haneda service, to be followed with the introduction of new year-round service to Rio de Janeiro and Panama City in December, Amsterdam in June 2015, as well as Vancouver-Osaka and Montreal-Venice seasonal services to be operated by Air Canada rougeTM. Performance of our leisure carrier subsidiary has continued to exceed our expectations. Just one year after its launch in July 2013, Air Canada rougeTM has served almost 2.5 million customers, including one million this past quarter, contributing to record system-wide load factors for the second consecutive quarter.

“I would like to thank our employees for their dedication and professionalism. Their focus on the care of our customers, along with our award-winning product, is recognized by numerous industry surveys of air travellers. This year’s Ipsos Reid Business Traveller Survey released in September confirms once again that Air Canada is the preferred airline for frequent business travellers by a continuingly growing margin across the country. Our investment in the well-being of our employees and commitment to provide progressive, best-practice programs has also been recognized with the recent naming of Air Canada as one of Canada’s Top 100 Employers for the second year in a row. In addition, Air Canada received top honours in the transportation category of the 2014 Canada’s Safest Employers Awards that recognize outstanding accomplishments of companies in Canada that promote the health and safety of their workers,” concluded Mr. Rovinescu.

Third Quarter Income Statement Highlights

System passenger revenues in the third quarter of 2014 amounted to $3,476 million, an increase of $299 million or 9.4 per cent from the third quarter of 2013, on an 11.0 per cent growth in traffic as yield declined 1.3 per cent year-over-year. An increase in average stage length of 2.6 per cent, due to international long-haul growth, had the effect of reducing system yield by 1.5 percentage points.

Passenger revenue per available seat mile (PRASM) decreased 0.2 per cent from the same quarter in 2013 as the lower yield was almost fully offset by a passenger load factor improvement of 1.0 percentage points. In the third quarter of 2014, system business cabin revenues increased $31 million or 5.3 per cent on yield growth of 5.3 per cent. All markets experienced business cabin PRASM improvements year-over-year.

Operating expenses in the third quarter of 2014 amounted to $3,272 million, an increase of $209 million or 7 per cent from the third quarter of 2013 on a 9.8 per cent increase in capacity. The unfavourable impact of a weaker Canadian dollar on foreign currency denominated operating expenses (mainly U.S. dollars), when compared to same quarter in 2013, increased operating expenses by $68 million.

Air Canada’s adjusted cost per available seat mile (adjusted CASM(1)), which excludes fuel expense, the cost of ground packages at Air Canada VacationsTM and unusual items, decreased 2.9 per cent compared to the third quarter of 2013. The 2.9 per cent reduction in adjusted CASM was less than the adjusted CASM decrease of 3.5 to 4.5 per cent projected in Air Canada’s news release dated August 7, 2014. This was primarily due to higher than forecasted expenses related to employee profit sharing programs due to better than expected results and to higher than expected depreciation expense largely due to Air Canada having recorded a depreciation charge related to certain aircraft maintenance events in the third quarter of 2014.

In the third quarter of 2014, Air Canada recorded operating income of $526 million compared to operating income of $416 million in the third quarter of 2013, an improvement of $110 million or 26.4 per cent. Operating margin of 13.8 per cent improved 1.8 percentage points in the third quarter of 2014 when compared to the third quarter of 2013.

Financial and Capital Management Highlights

At September 30, 2014, unrestricted liquidity (cash, short-term investments and undrawn lines of credit) amounted to $2,802 million (September 30, 2013 – $2,412 million). Air Canada’s principal objective in managing liquidity risk is to maintain a minimum unrestricted liquidity level of $1.7 billion.

At September 30, 2014, adjusted net debt(1) amounted to $4,623 million, an increase of $272 million from December 31, 2013. The airline’s adjusted net debt to EBITDAR ratio improved to 2.8 at September 30, 2014 versus a ratio 3.0 at December 31, 2013. Air Canada uses this ratio to manage its financial leverage risk and its objective is to maintain the ratio below 3.5.

In the third quarter of 2014, free cash flow(1) reflected an improvement of $57 million from the third quarter of 2013 on higher cash flows generated from operating activities partly offset by an increase in capital expenditures with the addition of two Boeing 787 aircraft.

For the 12 months ended September 30, 2014, return on invested capital (ROIC(1)) was 11.4 per cent versus 10.2 per cent for the 12 months ended September 30, 2013. Air Canada’s goal is to achieve a sustainable ROIC of 10 to 13 per cent by 2015.

Current Outlook

Air Canada expects fourth quarter 2014 system ASM capacity, as measured by available seat miles (ASMs), to increase by 7.75 to 8.75 per cent when compared to the fourth quarter of 2013. Air Canada expects that its fourth quarter 2014 system ASM capacity growth will be comprised of an increase in the total number of seats dispatched (system) of 6.25 to 7.25 per cent and an increase in average stage length (system) (measured by ASMs divided by seats dispatched) of approximately 1.5 per cent when compared to the same quarter in 2013.

Air Canada continues to expect its full year 2014 system ASM capacity to increase by 7.0 to 8.0 per cent. The projected system capacity increase is expected to be achieved at a unit cost which is below historical levels. For the full year 2014, Air Canada continues to expect an increase in the total number of seats dispatched (system) of 5.0 to 6.0 per cent when compared to the full year 2013. Average stage length (system) is expected to increase approximately 2.0 per cent year-over-year.

Air Canada also continues to expect its full year domestic ASM capacity to increase by 4.0 to 5.0 per cent when compared to 2013. For the full year 2014, Air Canada continues to expect an increase in the total number of seats dispatched (domestic) of 3.5 to 4.5 per cent while average stage length (domestic) is expected to increase approximately 0.5 per cent when compared to the full year 2013.

For the fourth quarter of 2014, Air Canada expects adjusted CASM to decrease in the range of 1.0 to 2.0 per cent when compared to the fourth quarter of 2013.

For the full year 2014, Air Canada now expects adjusted CASM to decrease in the range of 2.5 to 3.5 per cent from the full year 2013 (as opposed to the 3.2 to 4.2 per cent decrease projected in Air Canada’s news release dated August 7, 2014), the result of increased estimates for employee profit sharing programs and higher depreciation expense related to the accounting treatment of certain maintenance events in the third quarter of 2014.

Air Canada expects its full year 2015 system capacity to increase by 9.0 to 10.0 per cent when compared to the full year 2014.

Approximately 55 per cent of this forecasted capacity increase will be through the continued lower-cost growth of Air Canada rougeTM while approximately 38 per cent of the capacity growth will be directed at targeted international markets operated by the mainline carrier, primarily through the introduction of additional Boeing 787 Dreamliners.
Given that a large part of this capacity growth is driven by increased seat density and longer-haul flying, for the full year 2015, seats dispatched, on a system-wide basis, are expected to increase by 6.0 to 7.0 per cent while stage length is expected to increase approximately 3.0 per cent versus the full year 2014.
Air Canada expects its full year 2015 domestic ASM capacity to increase by 4.0 to 5.0 per cent, with a large part of the growth focused on the airline’s transcontinental services.

The increase on transcontinental services is partly driven by the positioning of certain Boeing 777 and 787 aircraft at Air Canada’s major hubs in Toronto and Vancouver.

In addition, in 2015, Air Canada expects to replace eight of its Embraer 190 aircraft with three Airbus A321 and two Airbus A320 aircraft. In order to better match capacity with demand for the 2015 summer season, the airline plans to take delivery of these five replacement aircraft prior to the start of the summer season while the eight Embraer 190 aircraft are only expected to exit the mainline fleet in the latter part of 2015. The overlap of this interim lift is forecasted to account for approximately 30 per cent of the projected domestic capacity growth in 2015.

For the full year 2015, seats dispatched in the domestic market are expected to increase by 2.5 to 3.5 per cent while stage length is expected to increase approximately 1.5 per cent versus the full year 2014.

Air Canada’s outlook assumes annual Canadian GDP growth of 2.0 to 2.5 per cent for 2014 and 2015. Air Canada also expects that the Canadian dollar will trade, on average, at C$1.12 per U.S. dollar in the fourth quarter of 2014 and C$1.10 for the full year 2014 and that the price of jet fuel will average 82 cents per litre for the fourth quarter of 2014 and 90 cents per litre for the full year 2014. For the full year 2015, Air Canada also expects that the Canadian dollar will trade, on average, at C$1.11 per U.S. dollar and that the price of jet fuel will average 88 cents per liter.

Financial Notes:

(1) In the third quarter of 2013, Air Canada recorded an interest charge of $95 million related to the purchase of its senior secured notes due in 2015 and 2016.
(2) Adjusted net income (loss) and adjusted net income (loss) per share – diluted are non-GAAP financial measures. Refer to section 16 “Non-GAAP Financial Measures” of Air Canada’s Third Quarter 2014 MD&A for additional information.
(3) EBITDAR (earnings before interest, taxes, depreciation, amortization, impairment and aircraft rent) is a non-GAAP financial measure. Refer to section 16 “Non-GAAP Financial Measures” of Air Canada’s Third Quarter 2014 MD&A for additional information.
(4) Unrestricted liquidity refers to the sum of cash, cash equivalents, short-term investments and the amount of available credit under Air Canada’s revolving credit facilities. At September 30, 2014, unrestricted liquidity was comprised of cash and short-term investments of $2,528 million and undrawn lines of credit of $274 million. At September 30, 2013, unrestricted liquidity was comprised of cash and short-term investments of $2,309 million and undrawn lines of credit of $103 million.
(5) Free cash flow (cash flows from operating activities less additions to property, equipment and intangible assets) is a non-GAAP financial measure. Refer to section 7.5 “Consolidated Cash Flow Movements” of Air Canada’s Third Quarter 2014 MD&A for additional information.
(6) Adjusted net debt (total debt less cash, cash equivalents and short-term investments plus capitalized operating leases) is a non-GAAP financial measure. Refer to section 7.3 “Adjusted Net Debt” of Air Canada’s Third Quarter 2014 MD&A for additional information.
(7) Return on invested capital (“ROIC”) is a non-GAAP financial measure. Refer to section 16 “Non-GAAP Financial Measures” of Air Canada’s Third Quarter 2014 MD&A for additional information.
(8) Operating statistics (except for average number of FTE employees) include third party carriers (such as Jazz Aviation LP (“Jazz”) and Sky Regional Airlines Inc. (“Sky Regional”)) operating under capacity purchase agreements with Air Canada.
(9) Adjusted CASM is a non-GAAP financial measure. Refer to section 16 “Non-GAAP Financial Measures” of Air Canada’s Third Quarter 2014 MD&A for additional information.
(10) Reflects FTE employees at Air Canada. Excludes FTE employees at third party carriers (such as Jazz and Sky Regional) operating under capacity purchase agreements with Air Canada.
(11) Average stage length is calculated by dividing the total number of available seat miles by the total number of seats dispatched.
(12) Includes fuel handling expenses. Economic fuel price per litre is a non-GAAP financial measure. Refer to sections 4 and 5 “Results of Operations” of Air Canada’s Third Quarter 2014 MD&A for additional information.
(13) Revenue passengers are counted on a flight number basis which is consistent with the IATA definition of revenue passengers carried.

In other news, Air Canada today said that along with the addition of two new Boeing 777-300 ER aircraft to its widebody fleet, it will expand the introduction of its new International Business Class product to include all Boeing 777-300 ER aircraft, seven more than previously announced. It will also reconfigure the aircraft to include its new Premium Economy cabin. Air Canada’s three-cabin international product and seating standard will therefore be extended to all 25 of the carrier’s Boeing 777-300 ER and 777-200 LR aircraft consistent with seating on its new Boeing 787-8 and -9 Dreamliner fleet.

Air Canada will also reconfigure its fleet of eight Airbus A330-300 aircraft to offer customers the option of its new Premium Economy cabin. The current Economy and International Business Class cabins of its A330-300 fleet will remain unchanged. Conversion of Air Canada’s Boeing 777 and Airbus A330 aircraft is planned to begin in the fourth quarter of 2015 and is expected to be completed by the second half of 2016.

Air Canada’s new international product offers three cabins of service highlighted by comfortable ergonomic seating that features 180-degree lie-flat seats in its International Business Class cabin. Visit 787.aircanada.com for details and a virtual tour of the Air Canada’s new international product currently featured on its Boeing 787 Dreamliner aircraft.

Air Canada’s new International Business Class cabin features up to 30 lie-flat Executive Pods on its Boeing 787-8 and -9 aircraft and up to 40 on Boeing 777-300 ER and -200 LR aircraft once converted, with an adjustable pneumatic cushion system that can be extended into a fully flat sleeping position. International Business Class features include:

An adjustable pneumatic cushion headrest offers a massage feature, unique for an airline in business class.

The personal entertainment screen with touch handset, at 18 inches, is the largest offered by a North American airline in business class.

Universal power and USB outlets are available at each seat.

Espresso and cappuccino service for International Business Class customers on Boeing 787 Dreamliner and 777 aircraft.
A 1-2-1 configuration guarantees direct aisle access with window views.

Air Canada is the only North American carrier to offer enhanced seating in Premium Economy with generous personal space, wider seats and greater legroom and recline. Premium Economy features 21 seats on its Boeing 787 aircraft and, once converted, 24 on Boeing 777 aircraft and 21 seats on Airbus A330 aircraft. Each seat is equipped with a 9- or 11-inch enhanced definition intuitive touch personal entertainment screen, as well as universal power and USB outlets. Air Canada’s Premium Economy cabin service offers premium meals, complimentary bar service and priority check-in and baggage delivery at the airport.

Air Canada’s new Economy cabin standard features slimline seats that provide personal space consistent with the comfort of Air Canada’s current Economy cabin. Each Economy seat on the Boeing 787 and 777 fleets will be equipped with a 9-inch enhanced definition intuitive touch personal entertainment screen with USB outlet and a universal power outlet available at arm’s reach.

Air Canada’s Dreamliner fleet will consist of a total of 15 787-8 aircraft and 22 of the larger capacity 787-9 aircraft. All 37 Boeing 787 aircraft are scheduled to be delivered by the end of 2019. As Air Canada takes delivery of new widebody aircraft for its mainline fleet, current Boeing 767 aircraft will be transferred to its leisure carrier subsidiary, Air Canada rouge.

Copyright Photo: Rob Rindt/AirlinersGallery.com. Air Canada is adding two additional Boeing 777-300 ER aircraft. This will bring the AC Boeing 777 fleet to a total of 25 aircraft, all of which will be reconfigured to the new international cabin product standard now featured on the 787 Dreamliner aircraft. Boeing 777-333 ER C-FNNQ (msn 43251) is pictured on the ground at Vancouver, British Columbia.

Air Canada aircraft slide show: AG Slide Show

Air Canada to inaugurate nonstop Toronto Pearson-Tokyo Haneda service today

Air Canada (Montreal) will inaugurate service today between Toronto (Pearson) and Tokyo (Haneda) with the departure of flight AC 005 at 1300 (1 pm) EDT. The year-round service is the only nonstop flight between Toronto and Tokyo-Haneda, located less than 30 minutes from downtown Tokyo. The new route will complement Air Canada’s existing flights to Tokyo Narita International Airport from Toronto, Calgary and Vancouver.

Air Canada will continue to offer service from Toronto, Calgary and Vancouver to Narita Airport.

The Tokyo-Haneda service will be launched using a Boeing 777-300 ER aircraft and transition in mid-July to Boeing 787 Dreamliner service. The 787 aircraft features a brand new contemporary décor and three cabins of service, International Business with 180-degree lie-flat pod seating, Premium Economy and Economy. It also offers an extensive choice of in-flight entertainment on enhanced-definition, seat-back touch screens along with power outlets and USB ports available for all customers.

Copyright Photo: Michael B. Ing/AirlinersGallery.com. Boeing 777-333 ER C-FRAM (msn 35250) completes its final approach into Beijing (Capital).

Air Canada: AG Slide Show