Air Canada shares at 10-year high after airline’s bullish outlook

MONTREAL Air Canada shares were at their highest value in more than 10 years on Thursday after the country’s largest airline said analyst forecasts had significantly underestimated one of its earnings benchmarks.

Shares in the Montreal-based airline closed at $19.20, up 10.7 per cent on the day.

The last time Air Canada shares were at these levels was in February 2007.

The shares surged after Air Canada said its EBITDAR (earnings before interest, taxes, depreciation, amortization, impairment and aircraft rent) will be better than the $475 million average forecast by analysts for the three months ended June 30.

In last year’s second quarter, Air Canada posted a record $605 million in EBITDAR and $186 million of net income, which includes many items required under general accounting.

Chief executive Calin Rovinescu says the results for this year’s second quarter, to be announced Aug. 4, were driven by higher revenue and lower than projected fuel costs.

He said in a news release that the quarter was capped by transporting nearly one million customers over the six-day Canada DayFourth of July period, including a single-day record of 166,850 passengers on June 29.

Walter Spracklin of RBC Capital Markets said the guidance reaffirmed his “bullish view” of the company. He raised his target price for Air Canada to $25 from $21, saying the shares are undervalued.

Air Canada was expected to earn $19.5 million of net income in the second quarter on revenues of nearly $3.8 billion, according to analysts polled by Thomson Reuters.