The country's largest airline said it had a record system load factor of 83.5 per cent compared with 81.5 per cent in March 2012.
The improvement came as traffic measured by revenue passenger miles increased 3.4 per cent and capacity measured by available seat miles increased by 1.0 per cent.
"Led by traffic increases in the Pacific, domestic Canada and U.S. transborder markets of 5.8, 4.5 and 4.4 per cent, respectively, Air Canada generated greater traffic of 3.4 per cent system wide on a capacity increase of 1.0 per cent," Air Canada president and chief executive Calin Rovinescu said.
"This is the fourth consecutive month Air Canada has reported a record load factor, underscoring the effectiveness of our capacity management strategy."
The improvements at Air Canada came as traffic and capacity at WestJet Airlines Ltd. (TSX:WJA) also increased last month.
WestJet said its load factor was 86.1 per cent in March, almost unchanged from 86.2 per cent in the same month last year.
The slight dip came as the airline increased its capacity 8.4 per cent and traffic increased 8.2 per cent.
WestJet said it flew 1.6 million passengers in March, a year-over-year increase of 6.7 per cent or some 101,100 travellers.
Porter Airlines reported a load factor of 58.1 per cent in March, down from 59.8 per cent a year ago. The regional airline said the drop came as capacity increased 0.7 per cent and traffic dropped 2.1 per cent.