OTTAWA (Reuters) - Air Canada reported a quarterly net profit on Friday and said it sees signs the bottom of the recession is behind it although it does not expect a full recovery for another 12 to 18 months.
The country's biggest airline said its results continue to be bruised by economic weakness and declines in passenger and cargo revenue, obstacles only partly offset by lower fuel prices.
"The industry is still facing an extremely challenging revenue environment," Chief Executive Calin Rovinescu said on a conference call with analysts.
The Montreal-based company said its cash balance of close to C$1.5 billion ($1.4 billion) gives it the financial flexibility required to mitigate the effects of a weak economy.
Shares in Air Canada rose 4.4 percent to C$1.19 in early on Friday on the Toronto Stock Exchange.
Faced with an industry-wide slowdown, Air Canada raised C$1 billion in July from lenders including the Canadian government and won a temporary pension deficit payment reprieve from its labor unions. Last month, it raised C$248 million in a share issue to increase its working capital.
It said it expects to see a C$50 million impact in 2009 from a cost-cutting and revenue growth plan it announced in August. That impact will increase to C$250 million in 2010 and the targeted C$500 million in 2011, the airline said.
OPERATING REVENUE, PROFIT DROPS
Air Canada, which competes domestically against no-frills WestJet Airlines Ltd, reported a net profit of C$277 million, or C$2.44 a share, for the third quarter. That compares with a net loss of C$132 million, or $1.32 a share, in the year-before quarter.
Adjusted to remove foreign exchange gains of C$295 million and a C$1 million gain on assets, the carrier reported a loss of 19 Canadian cents a share.
Operating revenue declined 13 percent to C$2.67 billion, and operating income fell to C$68 million from C$112 million in the year-before quarter.
Passenger revenue fell by C$366 million, or 13 percent, to $2.4 billion. That reflects an 11.2 percent drop in yield due to reduced traffic and competitive pricing to stimulate demand.
Traffic dropped 2.1 percent in the third quarter on a 3.3 percent cut in capacity, resulting in a 1 percentage point improvement in passenger load factor. System revenue per available seat mile fell 10.2 percent.
Unit costs dropped 9.2 percent, but after stripping out fuel expenses, the cost increased 4.5 percent. That betters the company's forecast for an increase of 5.5 percent to 6.5 percent.
For the full year, Air Canada expects system capacity, as measured in available seat miles, to decline by 4.25 percent to 4.75 percent. Fourth-quarter capacity is seen increasing by 1 to 2 percent.
It said it expects domestic capacity to fall by 3.5 percent to 4.0 percent in 2009.
The company said operating expenses fell 12 percent, or C$361 million, from the third quarter largely due to lower fuel costs.
($1=$1.07 Canadian)
(Reporting by Susan Taylor, additional reporting by Bhaswati Mukhopadhyay in Bangalore; editing by Peter Galloway)
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