Air Canada reported a 55 percent rise in operating earnings on Thursday, but said it expects higher fuel prices to add to its 2011 operating costs.
Second-quarter operating income rose to CAD$73 million (USD$75.7 million)in the three months to end-June, from CAD$47 million in the same period a year earlier.
Air Canada reported a net loss of CAD$46 million, compared with a net loss of CAD$318 million in the year prior.
The net loss in the quarter included foreign exchange gains of CAD$9 million, while in the year-ago quarter the net loss included foreign exchange losses of CAD$190 million.
System passenger revenue rose nearly 12 percent on a 6 percent growth in traffic. Passenger revenue per available seat mile (RASM) rose about 5 percent.
For July, Canada's biggest carrier flew fuller planes, reporting a system load factor of 86.4 percent, compared with 84.9 percent last year.
For the third quarter, the airline plans to increase its system available seat miles (ASM) capacity by 1.5-2.5 percent. It expects CASM, a measure of unit costs excluding fuel cost, to increase 1.0-2.0 percent.
Due to some flight schedule changes, Air Canada now expects its full-year domestic capacity to range between a 0.5 percent decrease and a 0.5 percent increase, compared with its earlier view of a decrease of up to 0.5 percent projected.
It expects higher fuel prices to add about CAD$800 million to operating costs in the year.
Air Canada stock has lost 7 percent of its value in the past three months. Even so, it is off its lows for the year as worries about possible strikes by its union employees have ebbed somewhat after it signed new contracts with two of the five groups.
Earlier this week, the airline reached a tentative agreement relating to compensation and benefits with the union that represents its flight attendants.