UPDATE 4-Air Canada shares rise as results top market view
+ Air Canada "A" shares rise 7 pct; "B" shares up 4 pct
+ Costs cut by C$70 mln in Q4 vs C$50 mln target
+ Raises cost-cutting target for 2010 to C$270 mln
+ Executives see travel uptick but remain cautious
(Adds analyst's comments, details, closing stock price)
By Nicole Mordant
VANCOUVER (Reuters) - Air Canada reported a smaller than expected quarterly loss Wednesday as Canada's biggest airline shrunk its fuel bill and beat its own target for cutting costs, sending its stock up 7 percent.
Although the airline said there are signs of a pickup in air travel after a bruising slowdown during the recession, company executives remained cautious about the speed of recovery, especially since Air Canada depends heavily on business class passengers.
"It is unclear how (long) the economy will take to fully recover and how long the reduction in high-yield business travel will take to return to the 2008 level," Air Canada Chief Executive Calin Rovinescu said.
Improvements in revenue toward the end of 2009, however, were encouraging, Rovinescu said on a conference call to discuss the airline's fourth-quarter results.
Air Canada's "A" shares closed up 10 Canadian cents, or 7 percent, at C$1.41 on the Toronto Stock Exchange. Its "B" shares rose 6 Canadian cents, or 4.5 percent, to C$1.38.
"Investors like the fact that even though revenue is not completely back yet, the carrier is keeping razor-sharp attention on its costs," said Robert Kokonis, managing director of AirTrav Inc, an airline consulting company.
The results mark something of a comeback for Air Canada, which seven months ago was teetering on the edge of bankruptcy protection, sideswiped by the recession and a heavy debt load, before it was saved by a last-minute financing and deals with its labor unions.
MAKES DEEPER CUTS, FILES LAWSUIT
Air Canada said it slashed C$70 million from its company-wide cost structure in the fourth quarter, C$20 million more than was laid out in the cost-cutting program it launched in the middle of last year.
The company is raising its 2010 cost-reduction target to C$270 million from C$250 million, getting it closer to its end goal of shrinking costs by C$500 million by the end of 2011.
Air Canada's operating costs are about 30 percent higher than those of its biggest domestic competitor, WestJet Airlines Ltd.
Air Canada reported a net loss of C$56 million ($52.3 million), or 25 Canadian cents a share, for the quarter ended Dec. 31, compared with a year-earlier loss of C$727 million, or C$7.27 a share.
Excluding a C$108 million foreign exchange gain and a small asset loss, the airline posted a loss of 62 Canadian cents a share -- ahead of analysts' expectations that it would lose 69 Canadian cents a share in the quarter.
"Most airlines around the world reported a fourth quarter that basically said: 'the bleeding is over, there is sequential improvement, there is light at the end of the tunnel'," said Raymond James analyst Ben Cherniavsky.
Air Canada's operating revenue fell to C$2.35 billion from C$2.5 billion, in line with analysts' forecasts.
The airline said it finished 2009 with C$1.4 billion in cash and further boosted its liquidity by securing a C$100 million increase to a C$600 million credit facility.
Rovinescu said Air Canada is filing a lawsuit in federal court Wednesday against the Toronto Port Authority in an attempt to speed up its return to Toronto Island airport.
Air Canada, through its contract with regional carrier Jazz Air , flew out of the downtown airport until 2006, when it was forced to leave by a company controlled by the chief executive of small Porter Airlines.
Porter has since made a successful business flying short-haul flights in Canada and to the United States out of the Island airport, which is just minutes from Toronto's city center and a favorite among business travelers.
"From a commercial perspective we are anxious to get into the airport. Our customers want us to do that," Rovinescu said.
($1-$1.07 Canadian) (Editing by Peter Galloway)
REUTERS
