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Declining Loonie Provides Challenges And Opportunities For Air Canada

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In this week’s issue of Canadian Travel Press, Air Canada president and CEO, Calin Rovinescu talks about the decline of the Canadian dollar and how it will provide both challenges and opportunities for Air Canada over the course of the next year.

On the challenge front, the carrier will need to mitigate the effect of a 90-cent loonie on its fuel, lease and maintenance costs, all of which are set in US dollars. But what Air Canada loses on the US dollar cost swings it will gain on the network revenue roundabouts, since more inbound travel is predicted as Canada becomes more affordable for American and overseas travellers.

The effect of the falling dollar was a hot topic with investment analysts who recently listened to Rovinescu trumpet the best financial results ever for the 77-year-old airline, which earned net income of $340 million last year. But in an hour-long conference call to report the 2013 results, he assured them that AC had seen the decline coming and had taken steps to mitigate its effects.

“As we forecasted weakness, we had a head start looking at ways to mitigate the exposure, such as through additional cost reduction and new revenue enhancement initiatives,” Rovinescu explained.

Some of the exposure will be taken care of via an aggressive currency hedge position, substantial US currency cash reserves and more than US$1 billion a year in revenues.

For the full story, by CTP’s Montreal editor, Mike Dunbar, click here

 

 

 

 

Posted in Airlines, News, Trends & Research

 

 

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