Air Canada profit beats estimates, stocks jump

Fri Nov 8, 2013 12:56pm EST
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By Solarina Ho

TORONTO (Reuters) - Air Canada's ACb.TO third-quarter results handily beat analysts' estimates on Friday as a key measure of costs fell, helping to push its stock to levels not seen since the financial crisis.

Shares of Canada's largest airline jumped more than 9.5 percent at one point after it reported a 59.4 percent surge in adjusted net income. Year-to-date, the stock has soared nearly 250 percent.

Results exceeded analysts' expectations set after Air Canada said last month that cost control measures were having a better-than-expected impact and that adjusted net income and earnings before interest, taxes, depreciation, amortization, impairment and aircraft rent (EBITDAR) were expected to be above 2012 levels.

"The strength was across the board - better revenue, better costs, better yield," RBC Capital Markets analyst Walter Spracklin wrote in a client note.

"Overall, it was a very strong quarter in which (Air Canada) did a solid job in managing controllable costs while shoring up its underlying business."

Apart from launching the low-cost Rouge carrier, which has surpassed the airline's targets, Air Canada beefed up its international network and boosted capacity to fend off intensifying competition.

The company expects its system capacity, as measured by available seat miles, to increase in the range of 3 to 4 percent in the fourth quarter. Next year, system capacity is still expected to increase by 9 to 11 percent compared with 2013.

Most of the increase will come from the planned delivery of the first six Boeing 787 Dreamliner aircraft, growth from its discount Rouge carrier and the addition of five high-density Boeing 777-300ER aircraft - three of which will be delivered between this month and next February.   Continued...

File picture of an Air Canada plane landing in front of a United plane at the Calgary International Airport in Calgary, Alberta, June 17, 2008. . REUTERS/Todd Korol