Air Canada's outlook lifted by slowing domestic capacity as it works to maximise fleet flexibility

Air Canada believes that changes it is making to business strategy - aircraft densification and the expansion of its low cost subsidiary, rouge - are positioning the airline to weather uncertain economic conditions in Canada and in other geographical regions.

A decline in industry domestic capacity later in 2016 should benefit Air Canada and rival WestJet, but Air Canada's yields will continue to decline because certain components of its strategy blueprint - longer stage length and a higher proportion of leisure travellers - dictate a decrease in yields.

Although Air Canada has ceased offering capacity guidance, most of its planned expansion of supply in 2016 is pegged for international markets as it works to craft a global network that rivals that of its large North American peers. Perhaps to reassure investors that it is prepared to act rationally if conditions suddenly worsen, Air Canada is stressing the flexibility it retains to adjust its fleet and redeploy capacity from underperforming markets to other regions of its network.