AC Narrows Losses in 2nd Quarter

[Kip Powick]

MONTREAL—Air Canada narrowed its losses to $46 million in the second quarter as the nation’s biggest air carrier improved its operating earnings.

The airline reported a loss per diluted share of 17 cents for the three months, compared to a net loss of $318 million, or 20 cents per share, in the same period last year.

On an adjusted basis, the loss was 20 cents per share, falling in line with average expectations from analysts polled by Thomson Reuters.

Operating income was up 55 per cent to $73 million in the quarter compared to $47 million in the second quarter of 2010.

Air Canada (TSX: AC.B) president and CEO Calin Rovinescu said fuel prices remain volatile and at historically high levels, estimating that will add about $800 million to operating costs in 2011.

“I am very pleased to report continued improvements in our financial performance for the second quarter,” Rovinescu said in a release.

“Despite significant increases in fuel prices year-over-year and the effects of a three-day work stoppage by our call centre and airport customer service agents represented by the CAW, the second quarter’s operating profit reflects our disciplined approach to capacity management.”

The airline sector is facing higher costs for jet fuel, which surged by 40 per cent in Canadian dollars from a year ago.

Air Canada and rival WestJet (TSX: WJA) have implemented price increases to offset the higher costs and take advantage of improved consumer confidence in Canada.

The airline and its regional partner carry about 31 million passengers annually to more than 170 destinations on five continents.

On Monday, it announced a tentative contract with flight attendants to avert a second strike this summer. It follows a three-day strike by customers service and airport workers that ended after the federal government threatened back-to-work legislation.