Air Canada plagued by soft yields in 2Q after helping to trigger a 1Q2013 loss

Air Canada's achievement of profitability during 2012 was dampened by a 1Q2013 loss driven by a weak yield environment in some of its most competitive markets as premium travel softened. While the carrier concludes booking trends during 2Q2013 are on the upswing, yields are still under pressure as Air Canada continues work on its cost base to withstand pricing actions by its competitors.

A key tenet of the carrier's strategy going forward is leveraging its international network through a widebody fleet upgrade encompassing Boeing 777s and 787s as it works to shed six older Airbus A340 aircraft during 2013. But in order to execute strengthening its international offerings Air Canada needs to ensure it has enough domestic and transborder feed to support long-haul service, which means it needs to ensure its domestic product remains competitive with WestJet and Porter, which have ambitious expansion plans for the Canadian domestic market.

A recent agreement between Air Canada and the Canadian Government to extend the current pension funding structure until YE2020 was significant in that it helps the carrier stave off increasing funding requirements, but the deal comes with stipulations that essentially prohibit any rewards to shareholders.