Air Canada posts lower revenue, notes competitive pressures

Fri May 3, 2013 12:14pm EDT
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By Solarina Ho

TORONTO May 3 (Reuters) - Air Canada reported a 3 percent decline in first-quarter revenue on Friday, due in part to a drop in premium travel demand and competitive pricing, and its shares fell nearly 5 percent.

Confirming preliminary results reported earlier, Canada's largest airline also posted a smaller loss for the period. Yield, a measure of the average fare paid per mile, fell 1.1 percent from a year earlier.

The company attributed much of the decline to less business travel compared with leisure travel, weather-related flight cancellations and delays, higher industry capacity and competitive pricing in some markets.

"A tough quarter could be a first sign of weaker demand," Royal Bank of Canada analyst Walter Spracklin said in a research note.

BMO Nesbitt Burns analyst Fadi Chamoun said pricing in the first quarter was "disappointing," but seemed to stem from several unusual factors.

The Montreal-based airline said demand improved in the second quarter for both economy and business classes. It expected capacity as measured by available seat miles to increase 2 percent to 3 percent this quarter.

"The progress we're making on our core priorities is getting us closer to our goal of sustained profitability," Chief Executive Officer Calin Rovinescu said on a conference call.

Air Canada said it expected costs per available seat mile, excluding fuel expense and unusual items, to range between a fall of 0.5 percent to a rise of 0.5 percent in the second quarter. The company revised this measure of unit cost to decrease more for the full year, to the range of 0.5 to 1.5 percent.   Continued...