Air Canada’s improved positive 1Q2014 outlook is encouraging as it works towards long-term stability

Canada's largest airline Air Canada has revised its outlook for 1Q2014 to a slightly more favourable performance after its cost and revenue metrics beat initial expectations.

Air Canada's encouraging revisions to its 1Q2014 projections are against a backdrop of a falling CAD against the USD, which is creating mixed results for the carrier. The outlook of Air Canada's rival WestJet is markedly different - it expects costs to rise and unit revenues to remain flat or increase slightly during 1Q2014 as it believes currency fluctuations will dampen its results.

The operation of higher density aircraft, protections in place to combat the swings in Canada's currency and tempered capacity growth helped Air Canada change its outlook for 1Q2014, but the carrier is still expected to report a quarterly loss. After the initial excitement of better-than-expected cost and revenue performance wears off, the loss is what will linger in investors' minds.