UPDATE 2-Air Canada's cost controls boost outlook, shares soar

Wed Aug 7, 2013 11:25am EDT
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Aug 7 (Reuters) - Air Canada reported its best-ever second-quarter results and forecast that costs would fall further this year as it ramped-up capacity for the launch of its Rouge discount airline last month.

Shares soared more than 23 percent to C$2.61, climbing back to levels last seen about six weeks ago.

Canada's largest airline said on Wednesday it expected costs per available seat mile, a key industry matrix, to fall between 1 percent and 2 percent this year, better than the 0.5 percent to 1.5 percent it forecast in June.

"We've seen an important improvement in virtually every metric by which a company is measured. Profit, revenue, operational performance, and customer satisfaction," Chief Executive Calin Rovinescu said on an analyst conference call.

Rovinescu said first-quarter weakness largely stabilized in the second quarter and he expected the trend to continue.

Air Canada, which is struggling to return to profitability, is boosting capacity as competition heats up. Its low-cost Rouge carrier is aimed at high-volume leisure travel to the United States and other international markets.

Montreal-based Air Canada is looking to add another 10 aircraft by the end of 2014 to Rouge's start-up fleet of four jets. It expects system capacity, as measured by available seat miles, to increase 2.5 percent to 3.5 percent in the third quarter.

It still sees capacity increasing 1.5-2.5 percent this year.   Continued...