AIR CANADA HAS posted its first profit in five years, and chairman Hollis Harris plans to keep the momentum rolling in 1995 with a further double-digit capacity expansion.
Group net profits of C$129 million ($92 million) in 1994 mark a dramatic turnaround from the C$326 million loss made the year before. Operating profits were maintained, even during the fourth quarter, to allow the company to end the year on a record high.
Behind the improvement is a 12% expansion in seat capacity, combined with a 6% decline in unit costs. While capacity rose to record levels, staffing numbers have shrunk by 20% since the boom of the late 1980s, says Harris.
He outlines plans to add another 13% to capacity in 1995, through a combination of increased use and the addition of 19 aircraft to the fleet.
The expansion in 1994 was achieved by re-calling three Lockheed L-1011s from desert storage and taking delivery of one new Boeing 767-300ER. The capacity increase has resulted in a large-scale rehiring of pilots by the carrier, which says that by October all 243 pilots laid off two years ago will have been rehired.
The expansion has taken its toll on load factors, which slipped two points to 63%, but that was largely offset by a 3% growth in yields.
"We are ready to give up a point or two on load factors and achieve higher yields. A [low] load factor also means that in a growing economy, our route system has enormous potential to generate incremental revenues without adding cost," says Harris.
He cautions, that Air Canada needs to continue to improve profitability to fund its $1 billion fleet-renewal programme, while continuing to fight tough competition, especially in the wake of Canada's "open-skies" agreement with the USA, signed on 24 February. Harris adds that Air Canada can compete with the US majors on unit cost and fleet utilisation.
Source: Flight International
