Reuters: Hot Stocks: UPDATE 2-Air Canada sees wider operating loss, shares tumble

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UPDATE 2-Air Canada sees wider operating loss, shares tumble Apr 22nd 2013, 15:17 Mon Apr 22, 2013 11:17am EDT * Releases preliminary results ahead of schedule * To take an impairment charge of C$24 mln * Cancellations, weather issues take C$10 mln bite in quarter * Shares fall more than 13 percent on TSX (Adds analyst comments, details on debt funding, share price) April 22 (Reuters) - Air Canada said on Monday it expects to post a wider first-quarter operating loss, due to weather-related flight cancellations, operational challenges at its main airport hubs and an impairment charge, sending its shares tumbling. Announcing preliminary results ahead of schedule, so it could share the information with lenders in talks on financing options, heavily indebted Air Canada said it expects an operating loss of C$106 million ($103 million) in the quarter, wider than the year-ago loss of C$91 million. Canada's largest airline said it lost C$10 million during the quarter, due to severe weather conditions. Unfavorable currency-related moves and a higher proportion of leisure passengers over business passengers also hurt results. Air Canada's Class B shares were down 13.3 percent at C$2.60 at midmorning on the Toronto Stock Exchange. The airline said it would book an impairment charge of C$24 million on certain Airbus A340-300 aircraft. It gave no details, but said it did not operate the aircraft. Air Canada said it expects earnings before interest, taxes, depreciation, amortization and impairment, and aircraft rent (EBITDAR) of C$145 million in the quarter, down from C$174 million a year earlier. The airline is scheduled to report first-quarter results on May 3. DEBT FINANCING Air Canada has C$760 million in principal and interest obligations due this year, and aircraft lease payments and capital expenditure-related costs bring total 2013 obligations to C$1.69 billion. For 2014, the airline has C$1.68 billion in total obligations, rising to C$2.40 billion in 2015 and roughly C$5.86 billion in 2016 and the years beyond. "We believe that Air Canada's preliminary results could pressure the stock in the short-term given the EBITDAR shortfall relative to expectations, and signs of slowing revenue and earnings momentum," TD analyst Tim James wrote in a note to clients. "However, indications that Air Canada is moving forward with refinancing its debt along with recent progress with labour stability and pension relief could limit any short-term weakness." QUARTERLY RESULTS Air Canada expects its first-quarter net loss to narrow to about C$260 million from C$274 million a year earlier. The carrier, whose main competitor is WestJet Airlines Ltd , also forecast an adjusted loss of about C$143 million, down from a loss of C$162 million in the first quarter of 2012. Capacity, as measured by available seat miles, fell 1.1 percent in the first quarter, in line with a prior forecast of no change to a decline of 1.5 percent. The company forecast full-year capacity growth of between 1.5 percent and 2.5 percent for the full year. Air Canada's passenger revenue per available seat mile (RASM), or unit revenue, rose 1.1 percent in the first quarter. ($1 = 1.0260 Canadian dollars) (Reporting by Euan Rocha in Toronto and Krithika Krishnamurthy in Bangalore; editing by Sriraj Kalluvila, Janet Guttsman and Matthew Lewis) Link this Share this Digg this Email Reprints

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