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* Q2 operating profit C$73 mln vs C$47 mln year ago
* Expects higher fuel prices to add about C$800 mln to 2011 operating costs
* System passenger revenue up 12 pct in Q2 (Adds details, shares)
Aug 4 (Reuters) - Air Canada Inc ACa.TO ACb.TO reported a 55 percent rise in operating earnings on Thursday, but said it expects higher fuel prices to add to its 2011 operating costs.
For July, Canada's biggest carrier flew fuller planes, reporting a system load factor of 86.4 percent, compared with 84.9 percent last year.
For the third quarter, the airline plans to increase its system available seat miles (ASM) capacity by 1.5-2.5 percent. It expects CASM, a measure of unit costs excluding fuel cost, to increase 1.0-2.0 percent.
Earlier this week, the airline reached a tentative agreement relating to compensation and benefits with the union that represents its flight attendants.
Due to some flight schedule changes, Air Canada now expects its full-year domestic capacity to range between a 0.5 percent decrease and a 0.5 percent increase, compared with its earlier view of a decrease of up to 0.5 percent projected.
It expects higher fuel prices to add about C$800 million to operating costs in the year.
Air Canada's second-quarter operating income rose to C$73 million ($75.7 million)in the three months to end-June, from C$47 million in the same period a year earlier.
Air Canada reported a net loss of C$46 million, or 17 Canadian cents a share, compared with a net loss of C$318 million, or C$1.14 a share, in the year ago.
The net loss in the quarter included foreign exchange gains of C$9 million, while in the year-ago quarter the net loss included foreign exchange losses of C$190 million.
On an adjusted basis, it reported a loss of 20 Canadian cents a share.
System passenger revenue rose nearly 12 percent on a 6 percent growth in traffic.
Passenger revenue per available seat mile (RASM), an industry performance benchmark, rose about 5 percent.
Air Canada stock has lost 7 percent of its value in the past three months. Even so, it is off its lows for the year as worries about possible strikes by its unionized employees have ebbed somewhat after it signed new contracts with two of the five groups. ($1 = 0.965 Canadian Dollars) (Reporting by Bhaswati Mukhopadhyay in Bangalore and Nicole Mordant in VANCOUVER; Editing by Gopakumar Warrier)