May 3, 2013 / 5:43 PM / in 5 years

Air Canada posts lower revenue, notes competitive pressures

TORONTO (Reuters) - Air Canada ACb.TO reported a 3 percent decline in first-quarter revenue on Friday, due in part to a drop in premium travel demand and competitive pricing, and its shares fell nearly 5 percent.

An Air Canada aircraft takes off after snowfall at Heathrow airport in London January 21, 2013. REUTERS/Neil Hall

Confirming preliminary results reported earlier, Canada’s largest airline also posted a smaller loss for the period. Yield, a measure of the average fare paid per mile, fell 1.1 percent from a year earlier.

The company attributed much of the decline to less business travel compared with leisure travel, weather-related flight cancellations and delays, higher industry capacity and competitive pricing in some markets.

“A tough quarter could be a first sign of weaker demand,” Royal Bank of Canada analyst Walter Spracklin said in a research note.

BMO Nesbitt Burns analyst Fadi Chamoun said pricing in the first quarter was “disappointing,” but seemed to stem from several unusual factors.

The Montreal-based airline said demand improved in the second quarter for both economy and business classes. It expected capacity as measured by available seat miles to increase 2 percent to 3 percent this quarter.

“The progress we’re making on our core priorities is getting us closer to our goal of sustained profitability,” Chief Executive Officer Calin Rovinescu said on a conference call.

Air Canada said it expected costs per available seat mile, excluding fuel expense and unusual items, to range between a fall of 0.5 percent to a rise of 0.5 percent in the second quarter. The company revised this measure of unit cost to decrease more for the full year, to the range of 0.5 to 1.5 percent.

Air Canada had announced preliminary results on April 22 as part of an effort to acquire a new type of debt certificate that was previously unavailable to Canadian airlines to finance new aircraft acquisitions.

The company said its first-quarter loss had narrowed to C$260 million, or 95 Canadian cents a share, from C$274 million, or 99 Canadian cents a share, a year earlier.

Operating revenue fell to C$2.95 billion from C$2.96 billion.

Shares of Air Canada were down 4.9 percent at C$2.74 on the Toronto Stock Exchange.

Reporting by Solarina Ho; Editing by Lisa Von Ahn

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