Air Canada posts operating profit, adds premium economy

Thu Feb 7, 2013 9:51am EST

Passengers walk past Air Canada planes on the runway at Pearson International Airport in Toronto April 13, 2012. REUTERS/Mike Cassese

Passengers walk past Air Canada planes on the runway at Pearson International Airport in Toronto April 13, 2012.

Credit: Reuters/Mike Cassese

Feb 7 Reuters) - Air Canada reported a fourth-quarter operating profit, helped by tighter cost controls, and said it would launch premium economy services on international flights as it tries to attract more business travellers.

Canada's biggest airline, whose main domestic competitor is WestJet Airlines Ltd (WJA.TO), also said it would add five new Boeing 777-300ER aircraft to its fleet.

Air Canada joins several other major airlines that have been looking to boost revenue by introducing "premium economy" seating, which offers more leg room, priority boarding and refundable tickets.

The premium cabin will be introduced on Air Canada's Montreal-Paris flights on July 11, and added onto more routes as new aircraft enter the carrier's mainline fleet.

Air Canada also plans to launch a low-cost vacation carrier in July as competition in Canadian skies heats up with WestJet preparing to launch Encore, its regional airline.

Air Canada's operating income in the quarter was C$46 million, compared with a loss of C$98 million a year earlier.

Net income was C$8 million, or 3 Canadian cents per share, compared with a loss of C$60 million, or 22 Canadian cents per share, a year earlier.

On an adjusted basis, the net loss was 2 Canadian cents per share. Analysts had expected the company to report a loss of 21 Canadian cents a share, according to Thomson Reuters I/B/E/S.

For full year 2012, Air Canada reported net income of C$131 million compared to a net loss of $249 million in 2011, it said, the first time the carrier made a profit in five years.

Operating revenue in the fourth quarter rose 5 percent to C$2.84 billion.

Operating expenses in the quarter fell C$2 million, mainly due to lower aircraft maintenance costs and a drop in ownership costs.

The airline said it expects system ASM capacity, as measured by available seat miles (ASMs), to decrease by up to 1.5 percent in the current quarter due in large part to a leap year day last year.

WestJet reported a stronger-than-expected jump in fourth-quarter profit on Wednesday, but gave a disappointing revenue outlook for the current quarter. (Reporting By Nicole Mordant in Vancouver and Bhaswati Mukhopadhyay in Bangalore; Editing by Saumyadeb Chakrabarty and Grant McCool)

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