Air Canada profit beats, jump in capacity forecast

Thu Nov 6, 2014 1:28pm EST
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By Allison Martell

TORONTO (Reuters) - Air Canada on Thursday reported a jump in third-quarter earnings that topped analyst expectations thanks to a firmer handle on costs, sending shares higher, and the company forecast a significant increase in capacity next year.

The airline has been expanding its low-cost vacation carrier Rouge and boosting what it calls density, squeezing more passengers onto planes.

The Montreal-based company said it expects capacity, or available seat miles, to rise between 9 and 10 percent in 2015, with 55 percent of the growth coming from Rouge.

"Rouge has been more successful than we expected," said Chief Executive Calin Rovinescu on a call with analysts and investors.

The capacity growth forecast was significantly higher than BMO Capital Markets analyst Fadi Chamoun expected, he said in a note to clients.

Benjamin Smith, Air Canada's president of passenger airlines, said the company could react quickly and slow down capacity growth if demand softens.

Separately, the airline said it would buy two more Boeing 777-300ER planes, bringing its fleet to 25. It also said it would put its new "international business class" seats in all its 777-300ER jets, seven more than previously announced.

Cost per available seat mile, a key measure of efficiency, fell 2.6 percent from a year earlier, to 15.4 cents, more than offsetting a slight decline in yield, which measures average fares.   Continued...

Air Canada's Boeing 787 Dreamliner lands at Pearson International Airport in Toronto, May 18, 2014. REUTERS/Aaron Harris