PWA, THE PARENT OF Canadian Airlines, has scaled down profit forecasts for this year, following a higher-than-expected net loss for 1994.

The group still expects to swing back to a net profit in 1995, but warns that this is likely to be in the region of C$52 million ($37 million), rather than the previously targeted C$75 million. PWA largely blames the weakness of the Canadian dollar, which has increased the costs of its foreign debt and aircraft purchases.

Exchange-rate losses are also blamed for the disappointing net loss of C$38 million for 1994, when the group had hoped to near break-even. The figures still mark a dramatic turnaround in the group's performance, however, with PWA showing its first operating profit since 1988.

The results also represent a further step in the recovery of the Canadian airline industry, following the swing back to profit of PWA's main domestic rival, Air Canada. Both carriers are now preparing to step up competition in the wake of Canada's open-skies agreement with the USA.

PWA president Kevin Jenkins points out that the turnaround at Canadian Airlines was achieved despite problems at the Canadian Regional operation, which suffered from a three-week pilots' strike in mid-1994 and the grounding of the 15-strong ATR 42 turboprop fleet over the peak Christmas period.

Operating profits are expected to rise strongly again this year, more than doubling to C$166 million, as the benefits of cost-cutting continue to feed through, says Jenkins.

The improving operating performance has come through a mix of rising yields and traffic, backed by a 2.8% fall in unit costs. PWA is negotiating further wage concessions with employees, with the aim of bringing unit costs down by another 2%.

Source: Flight International