BUSINESS

Air Canada's traffic up 2.9 per cent in May on strong demand to Europe

06/06/2013 11:02 EDT | Updated 08/06/2013 05:12 EDT
MONTREAL - Air Canada's traffic increased 2.9 per cent in May on strong demand for flights to Europe and steady growth on domestic routes.

The country's largest airline said Thursday that demand grew on all segments except the transpacific routes, which were down 0.5 per cent.

The airline's load factor was 81.8 per cent, up 0.1 of a percentage point as traffic growth slightly outpaced the 2.8 per cent increase in capacity.

"The increase in our load factor to 81.8 per cent over the prior year indicates we continue to manage our capacity effectively and that our planes are flying fuller as customers keep choosing Air Canada," stated CEO Calin Rovinescu.

He added that operational improvements resulted in a 30 per cent increase from last year in on-time performance in May.

Air Canada's (TSX:AC.B) traffic results include regional airlines from which it purchases capacity.

Domestic demand grew 2.7 per cent on 2.5 per cent higher capacity, while traffic to the U.S. was up 2.2 per cent on a 2.2 decrease in capacity.

Transatlantic traffic increased 6.2 per cent on a 5.8 per cent increase in capacity.

Demand for flights to Latin America, Australia and other destinations increased 2.7 per cent on a 1.9 per cent increase in capacity.

Analyst Walter Spracklin of RBC Capital Markets said the airline enjoyed a "nice lift in traffic growth" in May despite softening in the Pacific market.

He said the system-wide traffic increase of 2.9 per cent beat his forecast of one per cent on a nice uptick in Canada and a turnaround to Europe.

"However, we note that the Pacific market continues to soften and should traffic demand further wane on these international routes, we would expect more aggressive pricing strategies and additional pressure on network yields," he wrote in a report.

Cameron Doerksen of National Bank Financial said Air Canada will need to have a strong June to meet his forecast of having an 83.5 per cent load factor in the second quarter.

"We believe overall demand for air travel in Canada remains healthy," he wrote.

On Wednesday, WestJet Airlines Ltd. (TSX:WJA) said its load factor slipped 0.7 points from a year ago to 78.5 per cent in May, indicating slightly less of its total seating capacity was used.