Air Canada reports deep loss, shares skid

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 Shares fall 23 percent

(Adds CEO comments, details)

CALGARY, Alberta (Reuters) - Air Canada reported a worse than expected fourth-quarter loss Friday on waning passenger revenue and sharply higher costs, and said it is trying to wrest more savings from operations to preserve cash.

Shares in Canada's biggest airline fell 45 Canadian cents, or 23 percent, to C$1.50 on the Toronto Stock Exchange as investors fretted over its ability to ride out the recession.

Air Canada Chief Executive Montie Brewer said the carrier, which announced 2,000 job cuts last year, aims to reduce costs by another C$100 million ($81 million) in 2009, while slicing its capacity by up to 3.5 percent.

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It has already targeted up to $40 million in savings by seeking concessions from its suppliers.

Sky-high fuel costs were a big factor in last year's capacity reduction drive. Now, oil prices have skidded by more than $100 a barrel from the July record above $147.

"Although oil prices have since retreated, our tight-capacity strategy remains valid today as demand weakens given the global economic crisis," Brewer told analysts.

The airline said last month it was laying off another 345 flight attendants.

Air Canada, which has spent the past few months shoring up its balance sheet with C$641 million in new financing, also warned that the recession may put more pressure on its revenues in 2009. It said it has up to C$1 billion of assets it could use to increase its liquidity if needed.

In the fourth quarter, the company lost C$727 million, or C$7.27 a share, down from a year-earlier profit of C$35 million, or 35 Canadian cents a share.

Adjusting for net losses of C$527 million on foreign exchange and C$5 million on capital assets, the fourth-quarter loss was C$1.95 a share.

Operating revenue fell marginally to C$2.5 billion from C$2.51 billion.

The company had been expected to report a loss of C$1.53 a share, before special items, on revenue of C$2.47 billion, according to Reuters Estimates.

In the face of the economic meltdown, airlines are beginning to benefit from lower fuel costs and Air Canada said it expects that to more than offset falling revenue in 2009.

But in the quarter, lower fuel prices were overshadowed by the weaker Canadian dollar, which accounted for 40 percent of the carrier's per-unit cost increase, it said.

Overall costs per available seat mile rose 17.4 percent, or 9.9 percent excluding fuel.

($1=1.24 Canadian) (Reporting by Jeffrey Jones and Dhanya Ann Thoppil; Editing by Peter Galloway)

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