UPDATE 3-Air Canada loss widens, hurt by higher costs, weaker C$

Wed Feb 11, 2015 12:13pm EST
 
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(Updates with market reaction, analyst comment.)

Feb 11 (Reuters) - Air Canada reported a wider fourth quarter net loss on Wednesday as operating costs rose, in part because of the weaker Canadian dollar, and adjusted earnings came in just shy of analysts' expectations.

The stock, which jumped after the airline reported strong January traffic last week, gave back most of those gains, dropping 9.4 percent to C$12.00.

"We're back to where we started," said AltaCorp Capital Research analyst Chris Murray, who said the company actually did a little better than he had expected, after adjusting for one-time items. "The commentary was very positive."

Fuel costs fell to 80.7 cents per liter from 88.4 cents a year earlier, and Canada's biggest airline forecast more improvement in the first quarter, to 66 cents.

Air Canada reported adjusted earnings of C$67 million, or 23 Canadian cents a share, up from C$3 million, or 1 Canadian cent, a year earlier. Analysts, on average, had expected earnings of 24 Canadian cents a share, according to Thomson Reuters I/B/E/S.

Non-operating expenses rose 46 percent to C$206 million in the fourth quarter ended Dec. 31, while operating costs rose 9 percent to C$3.00 billion. The airline said employee benefit expenses had been higher than expected in the quarter.

A fall in Canadian dollar hurts Canadian carriers as they make major purchases, such as planes and fuel, in U.S. dollars. But a 50 percent slump in global crude prices since June has improved fuel costs.

The Montreal-based company's load factor, which measures how effectively it filled seats, rose to 81.0 percent from 80.3 percent.

Net loss widened to C$100 million ($79.16 million), or 35 Canadian cents per share, from C$6 million, or 2 Canadian cents, a year earlier. Operating revenue rose 7.3 percent to C$3.10 billion.

($1 = $1.26 Canadian) (Reporting by Allison Martell in Toronto and Anannya Pramanick in Bengaluru; Editing by Don Sebastian, Chizu Nomiyama and Cynthia Osterman)