UPDATE 3-Tighter cost controls start to pay off for Air Canada

Thu Nov 8, 2012 12:00pm EST
 
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* Airline forecasts lower fourth-quarter costs

* Third-quarter operating income rises 56 pct

* Stock rises 2.5 pct after results

* Company declines to give details on pension deficit talks (Recasts with comments from conference call, analyst comment)

By Nicole Mordant

Nov 8 (Reuters) - Air Canada reported a bigger-than-expected rise in third-quarter earnings on Thursday as it kept a tighter lid on costs that it said would continue in the fourth quarter, lifting its stock price.

Air Canada, the country's biggest carrier, said it expected its fourth-quarter unit costs, known in the industry as costs per available seat mile to decrease by between 2 percent and 3 percent from year-earlier levels, excluding fuel costs.

The results and forecast offered evidence that Air Canada's drive to whittle down its high-cost structure is working, analysts said. Its costs are about a third higher than those at WestJet Airlines Ltd, its biggest domestic competitor.

"They were more efficient and ran better cost savings than we were expecting... We were high on the Street and they beat our numbers," said RBC Capital Markets analyst Walter Spracklin.   Continued...