Air Canada: Aveos special charges total $120M in 1Q

Washington DC
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Air Canada announced today it will record special charges in the first quarter totaling $120 million to cover the impact of the bankruptcy and operational shutdown of the Star Alliance Carrier's main provider of heavy aircraft maintenance.

Aveos Fleet Performance locked out workers on 18 March and filed for protection under Canada's bankruptcy laws the following day. Air Canada offered emergency debtor-in-possession financing, but Aveos decided to shut down rather than accept the carrier's terms.

As a result, Air Canada will record special charges when its first quarter earnings report is released on 4 May.

A preliminary update issued today details the scope of the Aveos-related impacted on Air Canada's bottom line.

Included in the $120 million charges are a $65 million write-down on investments from a restructuring of Aveos in 2010, Air Canada says. Another $55 million will be charged to pay employee separation costs, the carrier adds.

Air Canada notes the $120 million total is preliminary.

Pre-tax earnings are expected to fall between $170 million and $180 million, Air Canada says. Cash and short-term investments should increase by $135 million to $2.25 billion compared to the same period a year ago, the airline says.