Low dollar bolsters Air Canada profits

CANADA's lower dollar is a double-header for the country's largest airline.

Air Canada's revenues have increased from business and tourist traffic (especially from Europe) as well as from air cargo. Passenger revenue was up $45 million for the second quarter of 1994 to $774 million (Canadian; US$557 million).

The main reason is the Canadian dollar, which is trading around 72.5 cents to a United States dollar. It has dropped not only against the dollar, but also against other major currencies.

That has Americans traveling north, Japanese flying east, and the French and Germans heading west.

Travel from Japan is up 15 percent for the first five months of the year compared with the same period in 1993; from France, it is up 21 percent. Altogether it is up 6.3 percent.

Air cargo is the surprise bonus from a lower Canadian dollar. Air cargo was so slow last year Air Canada sold off its DC-8 planes, which it used as air freighters. Now air cargo is booming.

``We have been over-running our target by as much as 50 percent,'' says Bob Thomson, Air Canada's general manager for cargo. ``Most of this strength is coming from the North Atlantic. The international routes are up 30.9 percent to the end of June.''

The summer months, when cargo usually drops off, are strong this year. This is because Europeans and Asians are buying more North American goods, which are cheaper.

Also, because of the free-trade agreement between Canada and the US, price is often the only difference between shipping goods from Montreal or Boston. Why pay $1 to an American carrier when Air Canada can do much the same job for 72 cents?