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Air Canada says higher fuel costs will hit margins

Air Canada is warning of lower margins in its current quarter as the airline deals with headwinds from higher fuel costs.

The airline said Friday that is expects its margins from its earnings before interest, taxes, depreciation, amortization and aircraft rent will be half what they were in the first three months of last year.

In early trading on the TSX, Air Canada shares were down more than five per cent at $13.61.

The outlook came as the carrier reported a deeper fourth quarter net loss. the airline said it lost $179 million, or 66 cents a share, in the quarter, compared with a loss of $116 million, or 41 cents, in the same period of the previous year.

The Montreal-based carrier said its adjusted earnings dropped to $38 million from $116 million a year earlier.

At the same time, Air Canada posted higher operating revenue of $3.43 billion, up from $3.18 billion.

The carrier said its yield, a measure of average fare paid per mile per passenger, was pushed lower in the fourth quarter, partly due to an increase in the number of seats sold at lower fares on long-haul flights to leisure markets,

Last week, to mark its 80th anniversary, the airline unveiled its new paint scheme for its fleet and new staff uniforms.