Air Canada Shares Are Taking Off As Costs Trimmed

All of a Sudden, the Market Loves Air Canada

They are definitely doing better, especially on the cost side, and they have a number of initiatives that are coming, said Canaccord Genuity analyst David Tyerman, who has a price target of $7 in the next year. Air Canada said its cost per available seat mile, a key measure of efficiency, for the third quarter would be down 3 per cent to 3.5 per cent, a significant improvement from its original forecast decline of 1.5 per cent to 2.5 per cent. While the cost news was good last week, Tyerman said other Air Canada changes could mean even further, possibly larger cost improvements in coming quarters and years. Specifically, Tyerman cited the creation of Rouge, the leisure carrier that began operations in July to sun destinations and to Europe. Rouge has significantly lower labour costs than the mainline carrier, and is expected to take over older planes in Air Canadas fleet with an estimated 33 planes by end of 2014, and 42 planes by 2015. The airline has begun taking delivery of five new Boeing 777s, which have a much higher density configuration, for use on popular long-haul routes such as Toronto to Munich and Montreal to Paris. Those new jets have 458 seats in three classes including the new premium economy instead of 349 seats in two classes. Tyerman added that next year the airline also takes delivery of six 787 Dreamliners, which have lower operating costs. Those new planes are expected to open up potential new routes direct flights to cities on other continents. The biggest challenge for the airline industry has always been excess competition, and many airlines went belly up in the past because of that. But Tyerman believes airlines are introducing more rational competition so that airlines can generate enough profit to reinvest in a new fleet or even computer systems. Thats a big change, and that may explain why airlines like Air Canada and WestJet and U.S.

As rival WestJet Airlines (TSX: WJA ) has grown in the Canadian market, Air Canada’s higher cost structure has come under pressure. Branding itself as a discount alternative to Air Canada, WestJet has taken a major role in the Canadian market. Guidance in the September report noted that cost per available seat mile should fall 3% to 3.5% for the third quarter compared with the 1.5% to 2.5% forecasted in August’s guidance. This is a major benefit for Air Canada as it tries to become more competitive with rivals such as WestJet. Analyst reactions Following this improved guidance, analysts have been raising price targets on Air Canada shares, noting that these results could drive shares higher. The following table summarizes some of the price target changes. Analyst Company C$5.00 Future potential As part of a fleet modernization strategy designed to cut fuel consumption, Air Canada currently has 37 Boeing 787s on order. The planes may be financed with ordinary long-term notes, but Air Canada may choose to utilize enhanced equipment trust certificates, or EETCs, as it did with its Boeing 777-300ERs. EETCs allow airlines to finance new aircraft through a program in which the EETC is backed by the aircraft itself. As a result, interest rates on EETCs are typically lower than those on ordinary debt. By taking the new jets a couple of years later, Air Canada also avoids some of the bugs that plagued United Continental (NYSE: UAL ) and its 787 fleet. Although the planes were fixed in the end, United Continental was forced to ground the 787s as safety issues arose and the 787 needed further testing. Air Canada also formed a new subsidiary airline called Air Canada Rouge to compete for discount-oriented leisure passengers on European and sun routes. The Rouge fleet is expected to grow significantly as Air Canada shifts older planes to Rouge. By using Rouge to fly routes that wouldn’t be profitable under mainline Air Canada’s cost structure, Air Canada can add capacity while not creating overcapacity on existing routes.

Canada Bolsters Armed Forces’ Front-Line

Markets closed Canada Bolsters Armed Forces’ Front-Line Press Release: Department of National Defence 6 hours ago Print Related Content OTTAWA, ONTARIO–(Marketwired – Oct 7, 2013) – The Honourable Rob Nicholson, P.C., Q.C., M.P. for Niagara Falls, Minister of National Defence, today launched a major initiative to bolster front-line investments by reducing inefficiencies, streamlining business processes and reducing corporate overhead within Canada’s defence organization. “In line with the Prime Minister’s intent to free up support for operational capability and readiness, National Defence has put forward an ambitious plan to reduce corporate overhead,” said Minister Nicholson. “Defence Renewal will help National Defence continue to build a modern first class military, ready to take on the challenges of tomorrow.” The initiative is forecasted to generate between $750 million and $1.2 billion in savings per year by 2017-18 to be reinvested in Defence operational and front-line priorities. Since 2006, the Government has increased the Defence budget by $4.5 billion to support Canada’s men and women in uniform. Some of the key areas where efficiencies will be sought include: Consolidation and synchronization of training across the Forces for common skill areas; Aligning and modernizing information systems to better predict spare parts and maintenance requirements, increase stocktaking accuracy and optimize the use of available stock items; and Improved contracting of goods and services, through simplifying contract specifications and consolidating purchases where appropriate. Defence Renewal is not a cost-cutting exercise and the overall intent is not to reduce the number of Regular Force, Reserve Force or civilian employees. However, it is expected that there will be a rebalancing of the workforce to address higher, operationally-driven priorities. As part of this rebalancing of the defence organization the objective will be to reallocate the equivalent of between 2800 and 4800 military and civilian personnel to address higher priority tasks. “In providing every National Defence and Canadian Armed Forces member an opportunity to have a say in Defence Renewal, we are promoting a culture of change and building our future together,” said Richard Fadden, Deputy Minister of National Defence. “This initiative is being embraced by the Department of National Defence and the Canadian Armed Forces and will be led from the top of the defence organization,” said General Tom Lawson, Chief of the Defence Staff. “Building on this, Defence Renewal presents us an opportunity to look for additional ways to better direct limited resources towards higher operational capability and readiness.” Defence Renewal was initiated by National Defence to strategically position resources and investments, and to continue building the modern, combat-effective, multi-role military envisioned in the Government’s Canada First Defence Strategy. Notes to editor / news director: For more information on Defence Renewal, please visit the Defence Renewal website.

Canada hiring more Filipinos to fill out 14,000 job vacancies

Patinio, Philippine News Agency October 8, 2013 2:45 AM InterAksyon.com The online news portal of TV5 MANILA, Philippines – Job opportunities await many Filipinos planning to work in Canada with the signing of a Memorandum of Understanding (MOU) between the Department of Labor and Employment (DOLE) and the Canadian government. With the MOU, Labor undersecretary Danilo Cruz said that the signing of the agreement will open possible work prospects for Filipino workers as the Canadian government is looking at the Philippines and other Asian countries to fill out at least 14,000 job vacancies in Saskatchewan to keep up with the labor demands of its still growing economy. Over the last four years, the Philippines has become the largest source country for both immigrants and temporary workers for Canada, overtaking China and India as the traditional sources, he said at the sidelines of the signing held in Makati City on Monday. Cruz, together with the contingent from Saskatchewan province of Canada led by its Premier, Brad Wall, signed the MOU which aims to upgrade the provision of the previous MOU between both countries in 2006. According to the Canadian official, some employers from Saskatchewan, which is one of the economic powerhouses in Canada, are currently here in the country to hire workers for an initial 150 job vacancies. However, he noted that they expect to hire more workers in the coming months. Not very long ago, we have a hundred (migrants) per year. Now we have about 3,000 per year and we still have a labor shortage, Wall added. The updated MOU will contain the following new provisions: identification of cooperation priorities; exchange of information; prohibition of charging of recruitment fees to workers; enjoining the employers recruiting overseas Filipinos workers (OFW) outside the Philippines to course hiring in the nearest Philippine Overseas Labor Office (POLO); enforcement of regulations to protect workers. Among the most in-demand jobs in Canada are in the fields of business, natural and applied sciences, health, social science, education, government service, trade, transportation, oil and gas processing and manufacturing. If you go in a website called Saskjobs.Ca today there are usually around 10,000 unfilled jobs. So in order to keep our economy growing we need to focus on the labor shortage and a part of that is international recruitment, Wall said.