Air Canada has reported an operating loss of $146 million for the fourth quarter of 2008, and more than $1 billion for the full year. For the fourth quarter, fuel expenses increased $177 million or 29 percent compared to the fourth quarter of 2007. A net loss of $727 million in the fourth quarter of 2008 included net losses on foreign exchange of $527 million. This compared to net income of $35 million in the fourth quarter of 2007, which included net gains on foreign exchange of $20 million.
Passenger revenues decreased $14 million or one per cent from the fourth quarter of 2007. Air Canada reduced its overall capacity by 7.8 percent in the fourth quarter of 2008 compared to the fourth quarter of 2007. Traffic decreased 5.3 percent on this capacity reduction resulting in a 2.1 percentage point improvement in system passenger load factor. The decrease in passenger revenues due to the lower traffic was partly offset by additional revenues from increased fares and fuel surcharges. Yield increased by 6.2 percent from the fourth quarter of 2007, reflecting yield growth in all markets.
For 2008, Air Canada reported an operating loss (before a provision for cargo investigations) of $39 million compared to operating income of $433 million in 2007. Fuel expense increased $867 million, or 34 percent, to $3.4 billion in 2008.
Passenger revenues of $9.7 billion in 2008 increased $384 million or four per cent mainly due to increased fares and fuel surcharges to partially offset significantly higher fuel prices. Excluding fuel expense, unit cost increased 1.7 percent from 2007. The airline recorded a net loss of $1,025 million compared to net income of $429 million in 2007. The net loss for 2008 included net losses on foreign exchange of $655 million and non-cash mark-to-market gains on financial instruments of $92 million which were largely related to the fair value of fuel derivatives. The net income recorded in 2007 included net gains on foreign exchange of $317 million and non-cash market-to-market gains on financial instruments of $26 million.
“2008 was a year marked by unprecedented volatility in fuel prices, significant fluctuations in foreign exchange and a worsening global economy,” said Air Canada president Montie Brewer. “Our fourth quarter and full year results reflect these challenges. However, we have a well established track record of adapting to challenges.”
He added: “Air Canada’s innovative revenue model is performing well and customers are continuing to embrace our competitively priced, value-driven options. Five consecutive years of record load factors demonstrate our unwavering focus on disciplined capacity management to ensure our assets are efficiently deployed with the objective of eliminating unprofitable flying. We have undertaken company-wide initiatives to reduce costs and surpassed our 2008 target of $100 million in cost reductions. Nevertheless, the additional value created through our revenue model and these cost savings initiatives was not enough to offset an unprecedented 34 per cent increase in fuel costs which added close to $900 million in expenses in 2008 alone. Looking ahead, forward bookings are in line with our planned capacity levels in North America. While we expect the Canadian market to perform well relative to other markets, we are seeing some weakness on transatlantic markets, particularly the United Kingdom. Capacity adjustments to date have been on track and we will continue to follow the market closely, fine tuning capacity as required. In 2009, we expect the benefits from the decline in fuel costs to more than offset the decrease in revenues resulting from reduced demand due to the economic downturn.”