Largely driven by proceeds from the partial sale of Regional subsidiary Jazz, Air Canada parent ACE Aviation Holdings posted first-quarter net income of C$118 million ($107.3 million), a figure that represented a vast improvement over a C$77 million loss in the year-ago quarter and overshadowed a C$29 million operating loss.

"During the quarter we made substantial progress in creating shareholder value through the successful monetization of our Regional carrier Jazz," Chairman, President and CEO Robert Milton said.

First-quarter revenues rose 14.1% to C$2.48 billion, driven by a 16% increase in passenger revenues to C$2.02 billion, while operating expenses climbed 16.4% to C$2.55 billion. Excluding a special labor charge of C$33 billion, ACE's operating loss was nearly three times greater than the C$10 million reported in the year-ago quarter.

First-quarter yield was up 9% to C17.9 cents on a 6% increase in RPMs to 11.24 billion. Capacity grew 5% and load factor rose 0.7 point to 78.7%, pushing RASM ahead 10% to C14.1 cents. Fuel costs jumped 37.1% to C$569 million. "As expected, spiraling fuel costs had a major negative impact on the airline's cost performance and...we anticipate this impact to continue throughout 2006," Milton said.

Jazz posted a 49.5% gain in revenues to C$320 million. The Regional's operating expenses jumped 54.9% to C$285 million, producing operating income of C$35 million, up 16.7% from C$30 million in the year-ago quarter. ACE netted more than C$200 million by selling a 20.3% stake in Jazz in a first-quarter IPO (ATWOnline, Jan. 26).

"While the fuel cost environment remains a concern...I am satisfied that we are well positioned to deliver a strong performance for the full year relative to the industry," Milton said.

There is no resolution to the controversy surrounding Tango bookings, however. President Montie Brewer said in a webcast that AC had no choice but to remove its low-fare product earlier this year from all CRSs/GDSs, which he said failed to find ways to distribute bookings for the unconventional offering that eschews seat assignments (ATW, April 2006). "We've been hoping the GDSs would find ways to distribute this innovative product. They were basically causing us to lose revenue on [Tango] operations and we waited for three years for the GDSs to solve the problem. We just can't afford to not have this product distributed correctly," Brewer said.