Air Canada suffers $1-billion loss in 2008, plans to clip flights and seat capacity further

Air Canada, the flag-carrier airline of Canada, recorded a colossal loss of $1 billion in 2008 because of what the airline described as record-high prices of fuel, declining demand for air travel, and unfavourable foreign exchange that hit earnings.

Air Canada, also the largest airline of Canada, said it was planning to trim its network further after having suffered the huge loss.

The airline is, meanwhile, facing growing threat of labour unrest.

In a statement, the airline, which had cancelled and downsized dozens of routes in 2008, said it expected to reduce global seat capacity by between 2.5% and 3.5% in 2009.

Montie Brewer, chief executive of Air Canada, told the media that though the prices of aviation turbine fuel had gone down, “the airline’s tight capacity strategy remains more valid today given the global economic crisis.”

During the busy Christmas period of 2008, Air Canada was compelled to cancel several flights because of sever winter, particularly in Vancouver, where all of the carrier’s short-haul and medium-haul flights to and from the city were cancelled on December 24.

In the fourth quarter, Air Canada posted an operating loss of $146 million – down from a profit of $72 million in the same period in 2007 – on account of falling demand for air travel and higher prices of fuel.

The airline said it was planning to scale back capacity by 10.5% in the first quarter, and up to 3.5% for the entire 2009 in an effort to make profits.
Air Canada, founded in 1937 and having its biggest hub at Pearson International Airport in Toronto, operates scheduled and charter flights as well as offers vacation packages through Air Canada Vacations.

ACE Aviation Holdings Incorporated, which owns 75% of Air Canada, had suffered a loss of $633 million in 2008.

Media reports quoted Dave Ritchie, general vice-president of the International Association of Machinists and Aerospace Workers, the group which represents mechanics, as saying that “Air Canada is in a bad shape.”

Air Canada, which had cut 2,000 jobs in June 2008, recently announced that it was planning to lay off 345 flight attendants.

The airline’s efforts to agree on a deal earlier in 2009 with its 5,000 ticket agents and call-centre employees failed as the workers union had rejected its proposals.