Air Canada shares drop on traffic data, rising oil

Mon Mar 7, 2011 3:53pm EST
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VANCOUVER (Reuters) - Shares in Air Canada slumped more than 8 percent on Monday following weaker February traffic figures at Canada's biggest airline and as oil prices continued higher.

Air Canada shares fell as low as C$2.59 on the Toronto Stock Exchange, a drop of 24 Canadian cents or 8.4 percent.

"Capacity growth on certain international routes was higher than I would have expected," PI Financial analyst Chris Murray said. He added, however, that February is traditionally a weak travel month.

Air Canada said on Friday afternoon its load factor fell 2.5 percentage points to 75.9 in February as its capacity rose more than its traffic.

Oil prices -- a key expense for airlines -- continued rising to above $105 a barrel on Monday as violence in Libya escalated and worries persisted that unrest could spread to other North American and Middle East oil-producing countries, disrupting crude supplies.

Air Canada estimates its operating income falls by about C$25 million a year with every $1 rise in the price of U.S. crude.

For WestJet Airlines Ltd, Air Canada's biggest domestic rival, the impact is about C$6 million, Murray said. WestJet's shares were down 45 Canadian cents, or nearly 3 percent, at C$15.03 on Monday afternoon.

($1=$0.97 Canadian)

(Reporting by Nicole Mordant; editing by Rob Wilson)