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Wed Jun 18, 2008 6:41pm BST
By Jeffrey Jones
CALGARY, Alberta, June 18 (Reuters) - Air Canada (ACa.TO: Quote, Profile, Research), which plans deep staff and capacity cuts to cope with sky-high fuel prices, may retire wide-body Airbus (EAD.PA: Quote, Profile, Research) jets sooner than expected to chop costs, its chief executive said on Wednesday.
Air Canada, the country's biggest airline, had expected to part with its Airbus A330-300 aircraft as it took delivery of new-generation Boeing (BA.N: Quote, Profile, Research) 787s, the much-anticipated planes that have been fraught with costly delays.
Now, as oil hovers above $130 a barrel, the airline is considering replacement aircraft as a temporary fuel-saving solution while it waits for the 787s, CEO Montie Brewer said.
"We're looking at all kinds of bridging options to maybe get that fleet out faster. But we still need that capacity for some of the international (routes)," Brewer told a transportation conference in New York hosted by Merrill Lynch.
"There are a lot of moving pieces, but we're looking at anything that can help us manage capacity better and get the greatest amount of cost down."
Air Canada's 274-seat A330s entered the fleet in 1999. It has eight if them. The carrier has already said it will park four older Boeing 767-200s while it rejuventates its fleet.
The airline last month said it hopes to start taking delivery of 787s in 2012 instead of 2010, complicating its fleet planning. It will push for compensation for the delay from Boeing.
On Tuesday, Air Canada blamed unprecedented fuel prices for its decision to chop 7 percent of its overall capacity this autumn and winter, a move that will mean 2,000 job cuts.
Brewer said Air Canada's fuel costs will be C$1 billion ($980 million) higher this year than in 2007.
At 13 percent, the biggest capacity cut will be in its Canada-United States business. That market is also being affected by the weak U.S. economy.
Some of the reduction in capacity there is the result of Air Canada's shift on many routes to smaller, more fuel-efficient Embraer (EMBR3.SA: Quote, Profile, Research) 190 jets, he said.
"We are seeing some softness in some of the leisure markets, like Las Vegas, but we're also seeing a lot of strength where Canadians want to fly to Florida and the Caribbean," Brewer said.
The carrier's saving grace compared with U.S. competitors has been the relative strength of Canadian domestic market, where it is targeting just a 2 percent cut in capacity.
Air Canada's cuts -- which it warned could be deeper if fuel prices stay it current levels -- are needed to protect the airline's financial health, Raymond James analyst Ben Cherniavsky said.
He recommended investors eschew the stock and lowered his estimates for operating earnings. Rival WestJet Airlines Ltd (WJA.TO: Quote, Profile, Research) should benefit from Air Canada's cuts, Cherniavsky said.
"Reduced capacity plans from the competition on domestic and transborder routes will leave the door open for the low cost carrier to continue its fleet expansion plans and -- more importantly -- maintain pricing power in the market," he wrote in a research note.
Air Canada's shares were up 2 Canadian cents at C$9.15 on the Toronto Stock Exchange. WestJet shares were down 6 Canadian cents at C$14.64.
($1=$1.02 Canadian) (Editing by Janet Guttsman)
Reuters
By Jeffrey Jones
CALGARY, Alberta, June 18 (Reuters) - Air Canada (ACa.TO: Quote, Profile, Research), which plans deep staff and capacity cuts to cope with sky-high fuel prices, may retire wide-body Airbus (EAD.PA: Quote, Profile, Research) jets sooner than expected to chop costs, its chief executive said on Wednesday.
Air Canada, the country's biggest airline, had expected to part with its Airbus A330-300 aircraft as it took delivery of new-generation Boeing (BA.N: Quote, Profile, Research) 787s, the much-anticipated planes that have been fraught with costly delays.
Now, as oil hovers above $130 a barrel, the airline is considering replacement aircraft as a temporary fuel-saving solution while it waits for the 787s, CEO Montie Brewer said.
"We're looking at all kinds of bridging options to maybe get that fleet out faster. But we still need that capacity for some of the international (routes)," Brewer told a transportation conference in New York hosted by Merrill Lynch.
"There are a lot of moving pieces, but we're looking at anything that can help us manage capacity better and get the greatest amount of cost down."
Air Canada's 274-seat A330s entered the fleet in 1999. It has eight if them. The carrier has already said it will park four older Boeing 767-200s while it rejuventates its fleet.
The airline last month said it hopes to start taking delivery of 787s in 2012 instead of 2010, complicating its fleet planning. It will push for compensation for the delay from Boeing.
On Tuesday, Air Canada blamed unprecedented fuel prices for its decision to chop 7 percent of its overall capacity this autumn and winter, a move that will mean 2,000 job cuts.
Brewer said Air Canada's fuel costs will be C$1 billion ($980 million) higher this year than in 2007.
At 13 percent, the biggest capacity cut will be in its Canada-United States business. That market is also being affected by the weak U.S. economy.
Some of the reduction in capacity there is the result of Air Canada's shift on many routes to smaller, more fuel-efficient Embraer (EMBR3.SA: Quote, Profile, Research) 190 jets, he said.
"We are seeing some softness in some of the leisure markets, like Las Vegas, but we're also seeing a lot of strength where Canadians want to fly to Florida and the Caribbean," Brewer said.
The carrier's saving grace compared with U.S. competitors has been the relative strength of Canadian domestic market, where it is targeting just a 2 percent cut in capacity.
Air Canada's cuts -- which it warned could be deeper if fuel prices stay it current levels -- are needed to protect the airline's financial health, Raymond James analyst Ben Cherniavsky said.
He recommended investors eschew the stock and lowered his estimates for operating earnings. Rival WestJet Airlines Ltd (WJA.TO: Quote, Profile, Research) should benefit from Air Canada's cuts, Cherniavsky said.
"Reduced capacity plans from the competition on domestic and transborder routes will leave the door open for the low cost carrier to continue its fleet expansion plans and -- more importantly -- maintain pricing power in the market," he wrote in a research note.
Air Canada's shares were up 2 Canadian cents at C$9.15 on the Toronto Stock Exchange. WestJet shares were down 6 Canadian cents at C$14.64.
($1=$1.02 Canadian) (Editing by Janet Guttsman)
Reuters
