Air Canada narrowed its quarterly operating loss as higher passenger revenue helped offset a big rise in fuel costs, sending its shares up.
Canada's No. 1 airline said on Thursday that higher fuel expenses were a significant drag in the first quarter, rising CAD$120 million. For the full year, higher fuel charges are expected to add about CAD$800 million to operating costs.
Including foreign exchange gains, Air Canada's net loss for the quarter was CAD$19 million, compared with a loss of CAD$112 million a year earlier.
The airline's operating loss was CAD$66 million, compared with CAD$136 million a year earlier. Operating revenue rose 9 percent to CAD$2.75 billion.
"In an environment where fuel charges increase 20 percent quarter-over-quarter, the fact that they were actually able to reduce their loss per share... is quite significant," said Robert Kokonis, managing director of airline consulting company AirTrav.
The improved results came as a result of higher fares, fuel surcharges, flying smaller planes, and cost cuts, Air Canada chief executive Calin Rovinescu said.
The higher fuel costs prompted Air Canada to lower its goals for capacity growth to a range of 3.5 percent to 4.5 percent in 2011, down from 4.5 percent to 5.5 percent.
Air Canada, which is in the midst of a cost-cutting programme started last year, said its earnings before interest, taxes, depreciation and aircraft rent (EBITDAR) were up 38 percent year over year.
The company raised its EBITDAR outlook for the first half of the year to a 5 percent increase over a year earlier. Last month, Air Canada had forecast EBITDAR to be flat for the first six months of the year.
LABOUR TALKS IN FOCUS
Air Canada is in talks with all five of its Canadian unions as all of its collective agreements expire this year. Those contract renewals, along with fuel price increases, are the main risks for the airline, Murray said.
Kokonis said that the chance of labour disruption has gone up with all of the contract talks, but added he is cautiously optimistic that Air Canada will reach deals with the unions.
Air Canada said it expects second-quarter operating expenses per available seat mile to fall by 0.5 to 1.5 percent, excluding fuel costs.
The carrier said system-wide passenger revenue rose 10 percent in the first quarter. Premium cabin revenue was up about 13 percent, helped by higher demand.
Passenger revenue per available seat mile rose 2.2 percent.
Rival WestJet Airlines reported a 20-fold jump in quarterly earnings on Tuesday, but hinted that its second-quarter performance may be muted.
Separately, Air Canada said its April system load factor fell to 81.9 percent from 82.4 percent a year earlier.
Kokonis said the lower load factors may be directly related to the higher ticket prices both airlines are charging to help offset fuel costs.
(Reuters)
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