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(Reuters) - Air Canada ACb.TO reported a 56 percent rise in third-quarter operating profit and said it was in talks with the government for an extension of pension deficit funding relief.
Air Canada, whose special funding regulations expire in January 2014, had a pension deficit of C$4.2 billion ($4.2 billion) as of January 1, largely because of low interest rates.
Analysts say funding the plan under normal rules could threaten the existence of Canada's largest airline.
The airline said its Canada-based unions support the extension request.
Air Canada, which competes with WestJet Airlines Ltd (WJA.TO), said it planned to increase its system capacity by 1.5 to 3.0 percent for 2013. For the current year, it expects system capacity growth of 0.75 to 1.25 percent.
Operating income in the quarter increased to C$421 million from C$270 million a year earlier.
The airline reported a net income of C$429 million or C$1.54 per share, compared with a net loss of C$124 million, or 45 Canadian cents per share, a year earlier, due mainly to foreign exchange gains.
On an adjusted basis, it earned 82 Canadian cents per share.
Operating revenue rose 3 percent to C$3.33 billion.
WestJet reported an 80 percent rise in third-quarter profit on Wednesday as it flew more passengers.
($1 = 0.9958 Canadian dollars)
Reporting by Bhaswati Mukhopadyay in Bangalore and Nicole Mordant in Vancouver; Editing by Saumyadeb Chakrabarty, Roshni Menon