Air Canada unveils new seat class, recovery on track

Thu Feb 7, 2013 1:24pm EST
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By Nicole Mordant and Bhaswati Mukhopadhyay

Feb 7 Reuters) - Helped by tighter cost controls and fuller flights, Air Canada's ACb.TO operations returned to profit in the fourth quarter, and the airline said it would launch premium economy services on overseas flights to try to woo more higher-paying travelers.

Canada's biggest carrier also posted a net profit for 2012, its first annual profit in five years, in what analysts saw as a sign that management's 3-year-old plan to stabilize the high-cost, debt-laden airline is bearing fruit.

"Everything that you want to see from a fundamental standpoint was trending well," RBC Capital Markets analyst Walter Spracklin said of the results, pointing to higher load factors, traffic and yields at the airline.

Emboldened by new labor contracts with all its unions, Air Canada launched a number of initiatives to cut costs and boost revenue over the past year, outsourcing more regional flights, adding international routes and revising maintenance contracts. It plans to launch a lower-cost carrier, Rouge, in July.

"They are re-making the airline and that will take 2-3 years to complete. From what I am hearing, they are making all the right moves," said Toll Cross Securities analyst Jacques Kavafian.

Air Canada joins several other major airlines introducing "premium economy" seating, which offers more leg room, priority boarding and refundable tickets at higher prices.

The premium cabin will be introduced on Air Canada's Montreal-Paris flights on July 11, and added onto more routes as new aircraft enter the carrier's mainline fleet.

Air Canada, whose main domestic competitor is WestJet Airlines Ltd (WJA.TO: Quote), also said it would add five new Boeing 777-300ER aircraft to its fleet.   Continued...

An Air Canada plane lands in front of a United plane at the Calgary International Airport in Calgary, Alberta, June 17, 2008. REUTERS/Todd Korol