Fuel costs hurting Air Canada
MONTREAL–High fuel prices that are consuming a growing proportion of income at Air Canada will likely hurt demand for air travel, the airline’s chief executive said yesterday.
Montie Brewer, Air Canada’s president and CEO, said the rapid rise and volatility of fuel prices was a concern at the country’s biggest airline, which is pushing ahead with plans to use newer, more fuel-efficient aircraft.
"The severity of it will impact customer demand. We’ll see how much the customer can absorb and still plan on travelling," he told reporters after the company’s annual meeting.
Brewer said every $3 (U.S.) rise in the price of a barrel of crude adds $75 million to Air Canada’s annual fuel costs, and fuel now accounts for some 31 per cent of the airline’s operating cost base, up from 25 per cent last year.
In the first quarter, Air Canada’s fuel expenses rose 22 per cent to $715 million (Canadian) from $585 million a year earlier, and fuel costs are now roughly twice what is spent on wages and salaries.
On May 15, Air Canada eased back on its fuel surcharges, brought in just a week earlier, after domestic rival WestJet Airlines Ltd. brought in lower extra fees.
Air Canada also plans to start charging customers a fee for a second checked bag on certain North American flights.
Brewer told the annual meeting that Air Canada’s fleet renewal program is a key part of its plan to combat high fuel prices no fax payday loan. The average age of aircraft in Air Canada’s fleet is less than nine years.
The world’s 14th largest commercial airline has taken delivery of 14 Boeing Co. 777s, and expects to have 18 in the fleet by early 2009.
"For 2008, we anticipate the 777s will account for more than 17 percent of our capacity, triple their production in 2007," Brewer said.
He also said Air Canada was seeking compensation from Boeing for delays in the delivery of its fuel-saving 787 Dreamliner, but declined to provide details.
The Dreamliner program, delayed in April for the third time, is some 15 months behind schedule. Air Canada has 37 firm orders and 28 options for the Dreamliner.
The company took delivery earlier this year of the last three of 60 EMB-190 jets it ordered from Brazilian aircraft-maker Embraer.
Air Canada’s class A shares closed down 57 cents, or 6.58 per cent, at $8.09 on the Toronto Stock Exchange yesterday.
The stock has lost more than half its value since being issued at $21 in late 2006.
Brewer blamed the poor stock price performance on a lack of liquidity in Air Canada shares and declines in valuations for comparable North American airlines.
Reuters News Agency