Wanna Buy Jazz?

Air Canada, after posting encouraging, profitable quarters in Q2 and Q3, rang up a crummy fourth quarter, so bad that the year's posting was in the red. The airline, facing the worst, says it needs to cut as much as 20% of its workforce, and also says it plans to sell off some operating divisions, the "Air Canada Family."

People are expensive.

Air Canada revealed to the Globe and Mail that, "Air Canada's salaries and benefits represent 31 per cent of our operating costs," according to the carrier's president, Robert Milton. He added, "We must do things differently and take additional measures."

Those measures include talking with its unions, to see if the union bosses will give up members' pay and benefits in return for an iffy promise of long-term survival; and more-concrete measures, like layoffs and spinoffs. As crude oil prices are expected to rise, once war in Iraq becomes reality, there is even greater pressure on carriers to cut operating costs. Passengers aren't beating on the carriers' doors, and taxes won't likely come down, so "everything else" -- especially jobs -- will be led to the sacrificial altar.

2002 Q4 even worse than 2001's

Though nobody thought it possible to trump 2001's Q4 losses, Air Canada's $364 million ($CDN) in 2002 was 31% worse than 2001's identical calendar period -- even in spite of a huge, new cost-conscious movement. Things aren't looking appreciably better, either, as CEO Milton told employees in December that Air Canada, along with her sisters in the US, are facing "...what is perhaps the worst revenue environment ever."

The year, overall, was better.

Although Air Canada's Q4 was a real downer, the airline posted a healthier year than 2001, losing $428 million ($90 million of that was posted by Jazz), versus 2001's staggering $1.32 billion -- and revenues actually increased by roughly a hundred million dollars, or nearly five percent.

Regionals' futures look worse.

Milton noted, "In Canada, we're continuing to see growth in competitive capacity from low cost carriers in a flat market. There is no sign of recovery in the regional market." Later came the leak that Jazz is on the block, along with previously-announced Air Canada plans to divest a large portion of its Aeroplan (frequent flier program) division, and nearly half (49%) of its technical services operation, in addition to the offer for sale of the airline's ground-handling ops.

Additional rumors still circulate that Air Canada may turn its cargo operation into a separate division; there are no solid rumors, though, that the cargo shipping business will be spun off.

FMI: www.aircanada.ca