Hit by high fuel costs, Air Canada parent ACE Aviation Holdings reported a fourth-quarter loss Friday, and unveiled plans to cut about 600 non-union jobs.
ACE Aviation said it expects the 20 percent reduction in jobs to come from management and other nonunion staff, mainly at Air Canada, the nation’s largest airline, and its cargo unit, as well as at its ground-handling and maintenance services. The company expects to record the job-cut costs in its first quarter.
“We’re probably looking at a one-off charge, probably in Q1 somewhere in the order of C$40 million,” said Brian Dunne, chief financial officer at ACE.
At yearend, ACE had 33,100 full-time employees, including union and nonunion workers, up from 32,000 a year earlier.
ACE Aviation is the holding company for Air Canada, which emerged at the end of September 2004 from 18 months of bankruptcy protection.
In its fourth quarter, the company said it lost C$103 million ($89 million), or C$1.02 a share, compared with a year-earlier profit of C$15 million, or 17 Canadian cents a share. The fourth quarter is traditionally a weak one.
Revenue rose to C$2.3 billion from C$2.06 billion as Air Canada flew more passengers and fuller planes.
ACE Aviation said its quarterly operating loss widened to C$35 million from C$3 million a year earlier. It did not immediately provide a per share figure for the operating loss.
Analysts were looking for ACE Aviation to lose 46 Canadian cents a share in the fourth quarter, before items, according to Reuters Estimates.
“Recognizing the significant progress we have made, there is no room for any complacency and we must continue to pursue efficiencies throughout our businesses,” said Robert Milton, chairman, president and chief executive of ACE.
ACE Aviation said aircraft fuel costs were its biggest expense increase in the quarter, soaring C$146 million, or 34 percent, from the year-before quarter.
Ownership costs, comprised of aircraft rent and depreciation, also rose as Air Canada added 41 aircraft, including regional jets from Bombardier Inc. and Embraer SA .
The company said it planned to pay out C$54.5 million in employee profit-sharing for 2005.
ACE Aviation, the first major airline company to spin out its customer loyalty points program, and which recently spun out Air Canada’s regional carrier, Jazz, said it will look for ways to monetize its Air Canada Technical Services unit.
“While progress has been made at ACTS in terms of developing the business as a stand alone company, more work remains to be done,” ACE Aviation said in a statement.
The company said it will also look for ways to enhance the value of other subsidiaries.
Air Canada’s yield, a closely watched measure of average passenger revenue for each revenue passenger mile flown, was 17.9 Canadian cents in the latest fourth quarter, versus 16.9 Canadian cents a year earlier.
Passenger load factor, which measures the average number of seats sold as a proportion of those available on flights, rose to 76.7 percent from 75.5 percent.
Jazz Air Income Fund, an open-ended trust that completed its initial public offering of units earlier this month, reported operating income of C$33.8 million, up C$12.1 million from the year before.
Operating revenue was up 63 percent to C$116.6 million as the Air Canada Jazz fleet expanded by 30 aircraft.
Meanwhile, Aeroplan Income Fund, the trust that owns 14.4 percent of Air Canada’s frequent flyer program, said it earned C$29.7 million, or 15 Canadian cents per unit, up from C$21.9 million a year ago. The fund was created in June 2005.
Aeroplan revenue rose 21 percent to C$154 million, from C$127.2 million.