Air Canada shares rise on encouraging forecast

Fri Apr 27, 2012 11:33am EDT
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TORONTO (Reuters) - Shares of Air Canada ACb.TO climbed as much as 16 percent on Friday after it offered a stronger-than-expected first-quarter profit estimate, bringing a ray of optimism to the country's largest airline after months with labor strife.

The carrier, which also reported a bigger cash position than some analysts had expected, said it would take charges of C$120 million ($120 million) related to the collapse of Aveos Fleet Performance Inc, its plane maintenance contractor.

Shares touched a high of 96 Canadian cents on Friday before drifting down to 94 Canadian cents on the TSX, a gain of 13 percent. It is still a far cry from the C$21 initial public offering price in November 2006.

The airline, which reports its financial results May 4, said late on Thursday it expected first-quarter earnings before interest, taxes, depreciation, amortization and aircraft rent to come in at between C$170 million and C$180 million.

That is well above Canaccord Genuity analyst David Tyerman's forecast of C$75 million and a C$101 million estimate by PI Financial analyst Chris Murray.

Tyerman raised his stock target to C$6.50 from C$5.25 on the news, which he said may reflect higher ticket prices.

The Montreal-based company also said it had C$2.25 billion in cash and short-term investments as of March 31, up about C$135 million from a year earlier.

"The company's liquidity position remains very strong, as we believe it only requires about C$1 billion to operate," Tyerman said in a note.

The results may also get a boost from the deferral of heavy maintenance expenses to future quarters, due to the shutdown of Aveos, which filed for creditor protection on March 19.   Continued...