Air Canada ready for competition but opposes quick exemptions for rivals

MONTREAL – Air Canada says it’s not afraid of competition from new Canadian low-cost airlines, but is opposed to Ottawa’s decision to fast-track new foreign ownership rules for two potential rivals.

“If there is a process to change the laws, to change restrictions, then we look forward to everybody to benefit within the same time frame,” CEO Calin Rovinescu said Monday after the airline smashed analyst forecasts with large gains in third-quarter profit and revenue.

Federal Transport Minister Marc Garneau announced last week that Ottawa plans to raise the foreign ownership cap for airlines to 49 per cent from 25 per cent in a bid to spur competition and lower fares.

Until the legislation is changed, the minister said he would grant exemptions that will allow aspiring discount airlines Canada Jetlines and Enerjet to land more international investors.

Canada Jetlines said the move will allow the Vancouver-based company to lock up investors so it can launch service next summer, while Calgary-based Enerjet said it plans to partner with Arizona’s Indigo Partners to fast-track development of its low-cost service.

Rovinescu said Air Canada (TSX:AC) already faces low-cost competition in many markets. In Canada, it squares off against WestJet Airlines (TSX:WJA) and Transat AT (TSX:TRZ), along with other providers such as Sunwing.

With its Rouge service, he said the airline has a tool that can be deployed for longer haul flights, including inside Canada, that is more cost competitive.

Air Canada said it’s studying the government’s proposed changes, but like WestJet it wants action to reduce other costs like airport rents and related charges, security surcharges and fuel taxes.

Rovinescu added that any move by Ottawa to privatize Canadian airports should reduce costs to airlines that can be passed on to travellers.

The Montreal-based airline earned $768 million or $2.74 per diluted share during the period ended Sept. 30, up from $437 million or $1.48 per diluted share a year ago, despite feeling competitive pressure on flights this summer to Europe.

On an adjusted basis the airline had $821 million in profits, or $2.93 per share, compared with $734 million, or $2.50, a year ago.

The airline had $4.45 billion in quarterly revenue, compared with $4.02 billion during the same period last year.

Air Canada was expected to earn $2.55 per diluted share in adjusted earnings on $4.29 billion of revenues, according to analysts polled by Thomson Reuters.

Ben Smith, Air Canada’s president of passenger airlines, said increased industry capacity is keeping prices competitive to and from North America.

“Our internal analysis shows we gained significant market share from various competitors, which bodes well for our long-term market position, especially in our key hubs of Toronto, Montreal, and Vancouver,” he told analysts.

On the Toronto Stock Exchange, Air Canada shares closed up 7.4 per cent to $12.83 in Monday trading.

Follow @RossMarowits on Twitter.