Air Canada on upswing despite headline-catching events, says CEO

MONTREAL – Air Canada’s financial turnaround and brand aren’t undermined by a few high-profile incidents such the temporary loss of Olympic snowboarding equipment and weather disruptions, the airline’s CEO said Monday.

“It ruins none of the gains that we’re making,” Calin Rovinescu told reporters after addressing the Canadian Club of Montreal.

The country’s largest airline has boosted its profits, launched a low-cost carrier, wiped out its large pension deficit and has seen its stock more than triple in the past year.

Yet, it attracted prominent headlines after misplacing the sporting equipment, denying a flight to an Alberta soldier with post-traumatic stress disorder, losing a dog it was transporting and seeing the flight plans of thousands of customers disrupted when severe winter weather hit Toronto.

“Like in every single one of the airlines that operate in the world, there will be an occasional situation…but in the overall scale of things, when you look at the success — best airline in North America, best performing stock on the stock exchange, best airline in Canada for business travel — I think that we’re on the right path.”

Earlier, Rovinescu told the business leaders that 2013 was a great year in which Air Canada demonstrated that it can be a “sustainably profitable global company” and a “brand ambassador for both Canada and commercial aviation.”

Air Canada announced Monday that it was adding new routes and additional flights from Toronto and Montreal to sun destinations on its low-cost Rouge subsidiary this spring and summer as it continues to transfer older aircraft from its main fleet.

Montreal will benefit the most with 36 per cent more seats being available and 20 per cent more flights with the introduction of Rouge flights to resort destinations in Cuba, Mexico and Haiti.

New Rouge destinations from Toronto include Tampa, Fla., Barbados and Nassau.

Rovinescu said the addition of more year-round Caribbean destinations to Air Canada Rouge’s network enables the carrier to compete more effectively on these routes because Rouge operates at 21 to 29 per cent lower cost than using the same planes in the mainline fleet.

Air Canada is also increasing competition to Europe next summer by expanding capacity by 30 per cent. It will fly more Boeing 777s outfitted with more seats to major cities and add new destinations on Rouge from Canada’s two largest cities. Athens, Barcelona, Dublin, Edinburgh, Lisbon, Manchester and Venice will be serviced from Toronto while flights from Montreal will include Athens, Barcelona, Rome and Nice.

The head of Trudeau International Airport said the changes are “encouraging.”

“There’s a lot of lift going to Europe this summer so there’s lots of good opportunities,” Aeroports de Montreal CEO James Cherry said following the speech.

Transat A.T. (TSX:TRZ.B) has said it will increase transatlantic capacity by two per cent next summer. WestJet (TSX:WJA) is also launching service to Dublin from Toronto and St. John’s, NL.

Analyst David Tyerman of Canaccord Genuity said there is a risk for all carriers that increased capacity will weaken yields.

“It’s going to come down to route by route. Ireland sounds like it’s definitely going to be a battle.”

Meanwhile, Rovinescu said Bombardier’s decision to delay the entry into service of its CSeries commercial jet won’t affect the airline’s decision on whether it will select the aircraft to complete the replacement of its narrowbody fleet.

“I think it’s going to be a very good airplane no matter what and the delays in and of themselves are not something that are a factor at this stage for us,” he said, adding that he hopes to know more by July.

Rovinescu also said reversing a large pension solvency deficit has been achieved earlier than expected and that efforts to add new routes to China from Montreal are being delayed by the lack of available landing slots and suitable flight connections.

On the Toronto Stock Exchange, Air Canada’s shares, which rose the most of any Canadian company last year, fell 53 cents or 5.7 per to $8.70 on Monday.