* Makes first full-year profit in five years
* To launch premium economy seat class in July
* Says Dreamliner delivery schedule on track
* Fourth-qtr oper profit C$46 mln vs loss of C$98 mln year
By Nicole Mordant and Bhaswati Mukhopadhyay
Feb 7 Reuters) - Helped by tighter cost controls and fuller
flights, Air Canada's operations returned to profit in
the fourth quarter, and the airline said it would launch premium
economy services on overseas flights to try to woo more
Canada's biggest carrier also posted a net profit for 2012,
its first annual profit in five years, in what analysts saw as a
sign that management's 3-year-old plan to stabilize the
high-cost, debt-laden airline is bearing fruit.
"Everything that you want to see from a fundamental
standpoint was trending well," RBC Capital Markets analyst
Walter Spracklin said of the results, pointing to higher load
factors, traffic and yields at the airline.
Emboldened by new labor contracts with all its unions, Air
Canada launched a number of initiatives to cut costs and boost
revenue over the past year, outsourcing more regional flights,
adding international routes and revising maintenance contracts.
It plans to launch a lower-cost carrier, Rouge, in July.
"They are re-making the airline and that will take 2-3 years
to complete. From what I am hearing, they are making all the
right moves," said Toll Cross Securities analyst Jacques
Air Canada joins several other major airlines introducing
"premium economy" seating, which offers more leg room, priority
boarding and refundable tickets at higher prices.
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, whose main domestic competitor is WestJet
Airlines Ltd, also said it would add five new Boeing
777-300ER aircraft to its fleet.
Air Canada's stock, which has surged 74 percent in the past
year, was unchanged at C$2.45 on the Toronto Stock Exchange on
Air Canada Chief Executive Calin Rovinescu said the carrier,
which has 37 Boeing Co 787 Dreamliners on order, had
"complete confidence" in the planemaker's ability to resolve the
lithium-ion battery issues "quickly and safely".
Regulators have grounded the Dreamliners while they
investigate the batteries.
Rovinescu said Boeing had given it Air Canada indication of
any changes to the plane's delivery schedule, which in Air
Canada's case, starts in 2014.
Air Canada said its operating income was C$46 million ($46
million) in the quarter, compared with a loss of C$98 million a
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. Adjusted to remove the impact of gains
and losses on financial instruments, foreign exchange and other
unusual items, the airline lost 2 Canadian cents per share.
For 2012, Air Canada reported net income of C$131 million
compared to a net loss of $249 million in 2011. The last time
the airline made an annual profit was in 2007.
Operating revenue in the fourth quarter rose 5 percent to
C$2.84 billion, helped by a strong international performance,
especially on its Pacific routes and across the Atlantic.
"The Pacific is the part of the world where revenue and
yield growth is strong... That is also going to help propel the
company down the road," said Robert Kokonis, managing director
of Toronto-based airline consultant AirTrav Inc.
In November, Air Canada unveiled a major expansion of its
flights to Asia, adding flights to Beijing, Seoul and Narita,
Operating expenses in the quarter fell C$2 million, mainly
due to lower aircraft maintenance costs and a drop in ownership
Air Canada's load factor, a measure of how many passengers
its aircraft carried compared with capacity, rose to 81.2
percent in the fourth quarter from 78.9 percent in the same
period the previous year.