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May 12 (Reuters) - Air Canada reported better-than-expected adjusted first-quarter earnings on Tuesday as fuel costs fell and other operating costs improved, and lowered its forecast for a key cost measure.
Canada's biggest airline said it expects adjusted operating expense per available seat mile to fall between 1.5 percent and 2.5 percent for 2015. It had previously forecast a decline of 0.75 percent to 1.75 percent.
Lower costs drove the beat, said RBC Capital Markets analyst Walter Spracklin, who wrote in a note to clients that the results "should be very well received."
A slump in global crude prices since June has lowered jet fuel costs, though a fall in the Canadian dollar against the U.S. dollar has partially offset that advantage as Canadian carriers make major purchases such as planes and fuel in U.S. dollars.
On an adjusted basis, Air Canada reported a net income of 41 Canadian cents per share for the quarter ended March 31, far above the 18 Canadian cents analysts were expecting, according to Thomson Reuters I/B/E/S.
Air Canada, which has been increasing capacity, including at its low-cost vacation carrier Rouge, reaffirmed its previous forecast that available seat miles would rise between 9 and 10 percent in 2015.
Yield, or passenger revenue per revenue passenger mile, dropped 4.2 percent from a year earlier. Air Canada said the decline was "an anticipated and natural consequence" of its decision to increase long-haul and leisure flights.
Air Canada is facing rising competition from WestJet Airlines Ltd, once a no-frills domestic carrier, which is adding international routes and boosting capacity while vowing to keep fares low.
For the second quarter, Air Canada said it expects adjusted cost per available seat mile to increase 0.25 to 1.25 percent from a year earlier.
Net loss narrowed to C$309 million ($256 million), or C$1.08 per share, in the quarter ended March 31 from C$341 million, or C$1.20 per share, a year earlier.
The company's load factor, which measures how effectively it filled seats, rose to 81.5 percent from 80.3 percent.
The Montreal-based carrier's operating revenue rose 6 percent to C$3.3 billion.
Up to Monday's close, Air Canada's shares had risen about 45 percent in the last 12 months. S&P/TSE Canadian Industrials Index was up about 11 percent in the same period, while WestJet shares had risen about 12 percent.
$1 = $1.20 Canadian Reporting by Amrutha Gayathri in Bengaluru and Allison Martell in Toronto; Editing by Don Sebastian and Chizu Nomiyama