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An Air Canada plane is seen after departing from Pearson International Airport in Toronto.CARLOS OSORIO/Reuters

Air Canada AC-T posted its second consecutive profitable quarter on Friday, signalling Canada’s largest airline is slowly leaving behind the financial ruin of the pandemic as travellers return to the skies.

Air Canada’s profit in the first three months of 2023 reached $4-million, compared to a loss of $974-million in the same period of 2022. Operating revenue almost doubled to $4.9-billion from the year-ago quarter due to higher demand for air travel.

When compared with the prepandemic quarter of 2019, sales are up by 10 per cent, Air Canada said in the earnings report, released before markets opened on Friday morning.

“We are very pleased with the results of the first quarter but as any sports fan knows one good period or a strong quarter does not mean you can relax for the rest of the game,” Michael Rousseau, Air Canada’s chief executive officer, said on a conference call with analysts on Friday.

On a diluted per-share basis, Air Canada lost 3 cents a share, compared with $2.72 a share in the year-earlier quarter. Cash flow for the first quarter rose by $1-billion to $1.4-billion, compared with a the same quarter of 2022.

“Our first-quarter financial results exceeded both internal and external expectations and we expect demand to persist, supported by strong advance bookings for the remainder of the year,” Mr. Rousseau said.

Walter Spracklin, a stock analyst at Royal Bank of Canada, said the results are better than he expected. He pointed to Air Canada’s strong seat bookings in the short term, but said it will be important to watch how demand holds up amid a weakening global economy and competition from discount airlines.

“Demand and pricing is expected to weaken post-summer, [but] we are mindful of a potential structural shift in the nature of airline demand that may see travel hold up despite a weakening economy,” Mr. Spracklin wrote in a note to clients.

Fadi Chamoun, an analyst at BMO Financial Group, said Air Canada’s first-quarter results exceeded expectations due in part to strong ticket sales and fuller planes.

For the first quarter of 2023, Air Canada’s passenger revenues more than doubled, and more than half the increase came from international markets. Revenue per available seat mile, an industry measure of efficiency, rose by 39 per cent, from the year-ago quarter. Costs per available seat mile rose by 2.5 per cent. “Cost control is and will remain a top priority for us,” Mr. Rousseau said.

Passenger capacity, measured by available seat miles, rose by 53 per cent in the first quarter on planes that were 85-per cent full.

Mark Galardo, vice-president of revenue and network planning, said strong demand has allowed Air Canada to raise fares higher than inflation and other economic indicators. “People want to travel,” Mr. Galardo said.

The company’s shares are up by 10 per cent this year on the Toronto Stock Exchange.

Montreal-based Air Canada is the country’s largest airline, controlling about half of the domestic market, according to Cirium. Calgary’s WestJet has about 31 per cent. The two mainstays are battling fierce competition from smaller carriers, including discount airlines Lynx Air and Flair Airlines, as well as Porter Airlines.

Mr. Rousseau acknowledged the expansions of new and existing rivals, but said Air Canada is able to withstand the challenges given its established network, and diverse revenue sources. “There is no doubt Canada is seeing an influx of narrow-body capacity,” Mr. Rousseau said.

Air Canada last week raised its profit outlook for 2023 amid strong demand and lower fuel prices. Full-year adjusted earnings before interest, taxes, depreciation and amortization will be between $3.5-billion and $4-billion, up from the previous target of $2.5-billion and $3-billion.

Air Canada’s losses for the three years of the pandemic to date total $9.9-billion. In the fourth quarter of 2022, Air Canada made a profit of $168-million, its first profitable period since the onset of the pandemic.

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