MONTREAL -- The dramatic recovery of Air Canada's shares took a step back Monday, falling more than 12 per cent after the carrier warned of disappointing first-quarter results that may signal a softening in the airline industry.
Air Canada shares closed down 38 cents at $2.62 Monday afternoon on the Toronto Stock Exchange after the airline reported preliminary results that included a bigger loss than investors expected, in part due to stormy winter.
Trading volume was extremely heavy at more than 5.5 million shares compared with less than 400,000 on an average day.
The stock had been on a tear, rising from a low of 82 cents last year to a peak of $3.40 earlier this month.
The country's largest airline, which reports actual results May 3, said it expects the quarterly net loss will be about $260 million compared with a net loss of $274 million a year earlier.
Adjusted for one-time items, Air Canada expects a loss of $143 million compared with an adjusted loss of $162 million in the first quarter of 2012.
Analysts had been expecting the airline to post an adjusted loss of $120.4 million, or 40 cents per share, on $3 billion of revenue, according to those polled by Thomson Reuters.
Air Canada said it issued the preliminary report ahead of the full results on May 3 to comply with disclosure rules as it explores a range of debt-financing options. It didn't disclose what financing options are being considered.
As of the end of March, Air Canada estimates it had $3.987 billion of adjusted net debt -- $246 million less than a year earlier.
Air Canada said the most recent quarter included a $10-million hit due to flight cancellations and delays caused by severe weather conditions.
Analyst Chris Murray of PI Financial Corp. said the results were a little "light" but didn't warrant the stock's price drop.
"I think the sell-off has been much too sharp, given the numbers that they've put out," he said in an interview.
David Tyerman of Canaccord Genuity said Air Canada's high debt and hefty pension obligations magnify the reaction to both positive and negative news.
Although the results were more in line with his expectations, he said investors may be worried by the impact of capacity-growth plans on revenues and yield.
-- The Canadian Press