Air Canada Falls as Packed Planes Push Yields Lower

Air Canada (AC/A) fell to its lowest level in more than 10 weeks after the country’s biggest carrier said yields would continue to decline this year as it packs fuller planes.

Air Canada fell 8.1 percent to C$8.51 in Toronto, its lowest closing level since May 27. The drop was the biggest since June 12.

Yield, or average fare per mile, declined 2.1 percent in the second quarter, the company said today. Chief Executive Officer Calin Rovinescu said yields will continue to fall this year as the airline adds more economy class seats and operates longer flights with a view to boosting profit.

“We are purposely looking at having a lower yield,” Rovinescu said on a conference call. “That is part of the strategy here as we look to have a greater bottom line.”

The average length of flights increased 2.5 percent in the second quarter from the same period a year earlier, reducing yield by 1.5 percentage point, Air Canada (AC/B) said in its earnings statement.

Air Canada’s yields in the second quarter were lower than Fadi Chamoun, an analyst at BMO Capital Markets in Toronto, had estimated, “implying a weaker-than-expected June month” particularly in U.S. transborder yields, he said in a note to clients.

Air Canada also boosted its 2014 cost-cutting target this year. Rovinescu is working to increase profit by about 15 percent over five years by expanding the company’s Rouge low-cost unit after deploying five Boeing Co. 777 aircraft with 31 percent more seats than the plane’s standard version. Air Canada said in May it was planning to refurbish another 12 of its 777s by adding more seats starting next year.

To contact the reporter on this story: Frederic Tomesco in Montreal at tomesco@bloomberg.net

To contact the editors responsible for this story: Ed Dufner at edufner@bloomberg.net James Callan

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