Air Canada reports wider-than-expected loss, shares drop

By Shivansh Tiwary and Allison Lampert

(Reuters) -Air Canada reported a bigger first-quarter loss than expected on Thursday on higher operating costs tied to labor and aircraft maintenance, overshadowing early signs of a revival in corporate demand.

Shares were down 9% at C$18.58 in afternoon trade in Toronto.

North American carriers are wrestling with higher costs as they add flights and operate older, less fuel-efficient planes, with shortages of new aircraft making it harder to capitalize on strong travel demand.

Mark Galardo, Air Canada's vice president for network planning, said corporate demand is up around 10% to 20% into the second quarter on an annual basis, citing fresh demand from the tech sector.

“We’re starting to see some very encouraging signals in corporate demand,” Galardo told analysts.

Canada's largest carrier did not see a similar first-quarter rebound in business travel that boosted U.S. airline profits.

Montreal-based Air Canada also said it is in discussions for compensation with RTX engine maker Pratt & Whitney after facing challenges with its geared turbofan engines that have grounded seven of its A220 jets.

The carrier, which is now holding contract talks with its pilots, said labor expenses increased 21% in the quarter.

Operating expenses rose 6% to C$5.22 billion ($3.80 billion), the airline said, even as it benefited from a resurgence in big spending by corporate customers who have been largely absent from the post-pandemic travel boom.

The airline reaffirmed its 2024 core profit forecast and continues to expect adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in the range of C$3.7 billion to C$4.2 billion.

Air Canada reported a first-quarter adjusted loss of C$0.27 per share, compared with analysts' average estimates of a C$0.07 loss, according to LSEG data.

Its quarterly operating revenue rose 7% to C$5.23 billion, beating Wall Street expectations of C$5.19 billion.

($1 = 1.3722 Canadian dollars)

(Reporting by Shivansh Tiwary in Bengaluru; Editing by Arun Koyyur and Bill Berkrot)