Air Canada last week reported operating income of $75 million in the second quarter of 2010 compared to an operating loss of $113 million in the second quarter of 2009, an improvement of $188 million. Earnings before interest, taxes, depreciation, amortization and aircraft rent (EBITDAR) of $333 million increased $198 million from the second quarter of 2009 (an increase of 147 per cent). These results were in line with the preliminary range of operating income of $60 million to $80 million, and EBITDAR of $320 million to $340 million, announced in Air Canada’s news release dated July 20, 2010.

“I am pleased to report stronger second quarter results that underscore the progress we’ve made on maximizing revenues and reducing costs, and also reflect encouraging signs of a gradual economic recovery,” said Calin Rovinescu, President and Chief Executive Officer.

“Although we are not at 2008 levels, premium revenue and yields have increased over the past two quarters.  While there remains much work to do, over the past 15 months, we have met many of the objectives we set out to achieve – namely to build adequate liquidity and achieve strong revenue management and better cost control while expanding our international network.”

Passenger revenues increased $256 million or 12 per cent from the second quarter of 2009 due to an 8.7 per cent growth in traffic and a 3.3 per cent improvement in yield.

“Asian and European markets in which we added capacity are performing well, led by our Pacific routes which recorded a 37 per cent increase in revenue from the previous year’s quarter on strong traffic and yield growth,” said Mr. Rovinescu. 

Passenger revenue per available seat mile (“RASM”) increased 6.6 per cent from the second quarter of 2009, due to both yield growth of 3.3 per cent and a passenger load factor improvement of 2.6 percentage points.

Premium cabin revenue growth accounted for almost half the total year-over-year increase in system passenger revenues in the second quarter of 2010, driven by a 15.8 per cent increase in traffic and a 12.9 per cent yield improvement. A gradual return of business traffic together with initiatives undertaken to improve revenue quality, one of Air Canada’s 2010 key priorities, led to this strong improvement in premium cabin yield.

Operating expenses increased $107 million or 4 per cent from the second quarter of 2009, mainly due to the capacity growth, higher fuel prices year-over-year, as well as increases in pension and commission expenses. Partially offsetting these increases was the impact of a stronger Canadian dollar on foreign currencies compared to the second quarter of 2009, which is estimated to have reduced operating expenses by $151 million from the same period in 2009, as well as a reduction in aircraft maintenance expense year-over-year. 

Air Canada estimates that disruptions to its transatlantic flying schedule following the closure of European airspace in mid-April due to volcanic ash had a negative impact of approximately $20 million on its operating income in the second quarter.

 “Our employees’ renewed focus on customer service and delivering an award-winning product are reflected in continued improvements year-over-year in customer satisfaction ratings. Air Canada has received a number of prestigious industry awards over the past months. In the second quarter, the Skytrax worldwide survey of more than 17 million air travelers ranked Air Canada as ‘Best Airline in North America.’