Tag Archives: 777233

Air Canada and Turkish Airlines move closer with a new codeshare agreement

Air Canada (Montreal) and Turkish Airlines (Istanbul) announced a reciprocal code sharing agreement that will make it easy and convenient for customers to connect between the two Star Alliance partner airlines. The agreement, to take effect the beginning of the second quarter of 2013, will leverage Air Canada’s planned Toronto-Istanbul route launching this summer pending receipt of government approval.

Under the code share agreement the two carriers will each place their flight designator code on select flights making it more convenient for travelers with such benefits as a single itinerary, through-checked bags and mutual status recognition. The agreement will include Air Canada’s code on Turkish Airlines’ Toronto-Istanbul flight and several destinations beyond Istanbul, not only in Turkey but also in the Middle East and Africa region. Turkish Airlines will also code share on Air Canada’s new non-stop service between Toronto and Istanbul providing connections to domestic Canada and several points from Toronto to U.S destinations. Moreover, with the loyalty program, passengers will have the opportunity to earn and use miles both on Turkish Airlines and Air Canada flights.

Top Copyright Photo: Michael B. Ing. Long-Range Boeing 777-233 LR C-FIVK (msn 35245) of Air Canada arrives at Tokyo (Narita).

Air Canada:

Turkish Airlines:

Bottom Copyright Photo: Keith Burton. Turkish Airlines’ Boeing 737-8F2 TC-JFM (msn 29775) with “Turkish Football Federation” additional marking approaches London (Gatwick) for landing.

Air Canada reports EBITDAR second quarter income of C$314 million

Air Canada (Montreal) recorded earnings before interest, taxes, depreciation, amortization and impairment, and aircraft rent (EBITDAR) of C$314 million in the second quarter of 2012 compared to EBITDAR of C$338 million in the second quarter of 2011. Operating income of $63 million decreased $10 million from the same quarter in 2011.

In the company financial call, airline executives confirmed AC is still proceeding with a low-cost subsidiary in 2013. The new subsidiary will operate Airbus A319s and Boeing 767-300s on leisure routes. AC’s pilots are fighting the creation of this new subsidiary.

Here is the full financial report (all currencies in Canadian dollars):

Income Statement Highlights

On a system capacity growth of 0.6 per cent, system passenger revenues increased $85 million or 3.3 per cent in the second quarter of 2012, on a 1.4 per cent growth in traffic and a 1.2 per cent improvement in yield. Passenger revenue per available seat mile (RASM) increased 2.0 per cent from the second quarter of 2011. In the premium cabin, second quarter 2012 passenger revenues increased $21 million or 3.7 per cent from the same quarter in 2011, driven by a 2.1 per cent improvement in yield and a 1.6 per cent growth in traffic.

In the second quarter of 2012, operating expenses increased $81 million or 3 per cent from the second quarter of 2011, primarily due to increases in wages, salaries and benefits, aircraft maintenance, capacity purchase costs and other expenses. Partially offsetting these increases was a reduction in depreciation, amortization and impairment expense. Unit cost, as measured by operating expense per available seat mile (CASM), increased 2.3 per cent from the second quarter of 2011. Excluding fuel expense and the cost of ground packages at Air Canada Vacations, CASM increased 3.6 per cent from the second quarter of 2011. The 3.6 per cent increase in CASM, excluding fuel expense and excluding the cost of ground packages at Air Canada Vacations, was less than the 4.0 per cent to 5.0 per cent increase projected in Air Canada’s news release dated May 4, 2012, as a number of cost categories were slightly below what Air Canada had previously anticipated.

Air Canada reported an operating income of $63 million in the second quarter of 2012, a decline of $10 million from the second quarter of 2011.

Air Canada reported a net loss of $96 million or $0.35 per diluted share in the second quarter of 2012 compared to a net loss of $46 million or $0.17 per diluted share in the second quarter of 2011. On an adjusted basis, net loss per diluted share was $0.05 in the second quarter of 2012 compared to a net loss per diluted share of $0.01 in the second quarter of 2011. Removing the impact of the labour disruptions and the capacity impact related to the Aveos closure, the adjusted income per diluted share would have been $0.07 to $0.12, an improvement over the same quarter in 2011.

Liquidity Highlights

At June 30, 2012, Air Canada’s cash and short-term investments amounted to $2,383 million, $124 million higher than Air Canada’s cash and short-term investments balance at June 30, 2011, and represented 20 per cent of 12-month trailing operating revenues.

At June 30, 2012, adjusted net debt of $4,223 million decreased $353 million from December 31, 2011. This reduction in adjusted net debt included the impact of lower debt balances and the impact of an increase in cash and short-term investments of $284 million from December 31, 2011, which was mainly due to positive free cash flow of $368 million in the first six months of 2012.

Current Outlook

In the third quarter of 2012, Air Canada expects its system ASM capacity, as measured by available seat miles (ASMs), to increase in the range of 0 to 1.0 per cent when compared to the third quarter of 2011.

Taking into account reported ASM capacity for the first six months of 2012, Air Canada expects its full year 2012 system capacity to increase in the range of 0.5 to 1.5 per cent when compared to the full year 2011 (as opposed to the 0 to 1.5 per cent ASM increase projected in Air Canada’s news release dated May 4, 2012) and expects its full year 2012 domestic capacity to increase in the range of 0.5 to 1.5 per cent from the full year 2011 (as opposed to the 0 to 1.5 per cent ASM increase projected in Air Canada’s news release dated May 4, 2012).

For the third quarter of 2012, Air Canada expects CASM, excluding fuel expense and excluding the cost of ground packages at Air Canada Vacations, to increase by 1.0 per cent to 2.0 per cent from the third quarter of 2011.

Air Canada continues to expect its full year 2012 CASM, excluding fuel expense and excluding the cost of ground packages at Air Canada Vacations, to increase by 0.5 per cent to 1.5 per cent from the full year 2011 level.

Air Canada’s above-mentioned outlook assumes Canadian GDP growth of 1.5 per cent to 2.0 per cent in 2012. In addition, Air Canada expects that the Canadian dollar will trade, on average, at C$1.01 per U.S. dollar in the third quarter of 2012 and for the full year 2012 and that the price of jet fuel will average 85 cents per litre for the third quarter of 2012 and 88 cents per litre for the full year 2012.

The following table summarizes Air Canada’s above-mentioned outlook for the third quarter of 2012 and for the full year 2012 and related major assumptions:


	Third Quarter 2012 versus Third Quarter 2011	Full Year 2012 versus Full Year 2011
Current Outlook
Available seat miles (System)	Increase 0% to 1.0%	Increase 0.5% to 1.5%
Available seat miles (Canada)	n/a	Increase 0.5% to 1.5%
CASM, excluding fuel expense and excluding the cost of ground packages at Air Canada Vacations	Increase 1.0% to 2.0%	Increase 0.5% to 1.5%


	Major Assumptions – Third Quarter 2012	Major Assumptions – Full Year 2012
Major Assumptions
Canadian dollar per U.S. dollar	1.01	1.01
Jet fuel price – CAD cents per litre (net of fuel hedging)	85 cents	88 cents
Canadian economy	2012 annualized Canadian GDP growth of 1.5% to 2.0%	Canadian GDP growth of 1.5% to 2.0%

For the full year 2012, Air Canada also projects the following:

Depreciation, amortization and impairment expense to decrease by $55 million from the full year 2011, as opposed to the decrease of $70 million projected in Air Canada’s new release dated May 4, 2012. This revised guidance reflects changes in residual values of aircraft and the acceleration of depreciation of various assets, including as a result of the planned removal of nine CRJ-100 aircraft from the covered fleet under Air Canada’s capacity purchase agreement with Jazz Air LP.
Employee benefits expense to increase by $30 million from the full year 2011.

The following table summarizes the above-mentioned projections for the full year 2012:


	Full Year 2012 versus Full Year 2011
Depreciation, amortization and impairment expense	Decrease $55 million

Employee benefits expense	Increase $30 million

The outlook provided constitutes forward-looking statements within the meaning of applicable securities laws and is based on a number of additional assumptions and subject to a number of risks. Please see section below entitled “Caution Regarding Forward-Looking Information.”

Non-GAAP Measures

Below is a description of certain non-GAAP measures used by Air Canada to provide additional information on its financial and operating performance. Such measures are not recognized measures for financial statement presentation under Canadian GAAP and do not have standardized meanings and therefore may not be comparable to similar measures presented by other public companies. Readers should refer to Air Canada’s Second Quarter 2012 MD&A for a reconciliation of non-GAAP financial measures.

Adjusted net income (loss) per diluted share is used by Air Canada to assess share performance without the effects of foreign exchange, mark-to-market adjustments on derivatives and other financial instruments recorded at fair value and unusual items.
EBITDAR is commonly used in the airline industry and is used by Air Canada to assess earnings before interest, taxes, depreciation, amortization and impairment, and aircraft rent, as these costs can vary significantly among airlines due to differences in the way airlines finance their aircraft and other assets.
Operating expense, excluding fuel expense and excluding the cost of ground packages at Air Canada Vacations, is used by Air Canada to assess the operating performance of its ongoing airline business as such expenses may distort the analysis of certain business trends and render comparative analyses to other airlines less meaningful.
Free cash flow is used by Air Canada as an indicator of the financial strength and performance of its business because it shows how much cash is available for such purposes as repaying debt, meeting ongoing financial obligations and reinvesting in Air Canada.
Adjusted net debt is a key component of the capital managed by Air Canada and provides a measure of the airline’s net indebtedness.

Air Canada: