Air Canada’s favourable top-line 2Q2014 results but 7% capacity growth provokes reduced yields

Air Canada's record profitability in 2Q2014 is being undermined by a decline in the airline's yield performance, resulting in the airline defending its strategy of improving its bottom line by an increased stage length and a higher proportion of economy seating.

The underlying philosophy is that Air Canada is creating a framework for unit cost to decline at a greater level than yields and unit revenues as it works to reduce its unit cost, excluding fuel, by 15% from CY2012 levels in the medium term.

It may take some time for the market to understand Air Canada's tactics; but the airline's 2Q2014 results seem to indicate there is merit to the airline's efforts to meet its goals of long standing profitability.