Business briefs – May 7

More travellers flying the expensive seats in the front of the plane helped Air Canada to sharply narrow its losses as the economy continued to slowly recover in the first months of the year.

Air Canada narrows first-quarter loss

MONTREAL — More travellers flying the expensive seats in the front of the plane helped Air Canada to sharply narrow its losses as the economy continued to slowly recover in the first months of the year.

Canada’s largest airline (TSX:AC.B) reported Thursday that premium cabin revenues grew by $58 million or 15 per cent from last year, driven by a 10.6 per cent increase in traffic.

The gains accounted for almost 70 per cent of the $84 million increase in system passenger revenues, which rose to nearly $2.1 billion.

The first quarter marked an improvement from last year and sequential growth over the last six months. But it still remained well below pre-recession levels.

“Nonetheless, this is a positive indicator that business travel demand is slowly starting to return,” Air Canada CEO Calin Rovinescu said during a conference call with analysts.

He said the improvement demonstrated that the airline’s initiatives such as paid upgrade programs are starting to stick and that customers are recognizing the value of its business offering.

The business class gains were enjoyed in the Rapidair corridor connecting Toronto, Ottawa and Montreal as a result of improving economic conditions.

“Not only is business travel coming back in Canada, we’re positioning Toronto as a great place to connect internationally from North America and we’re having success in attracting business traffic to and from the U.S. Northeast,” Ben Smith, chief commercial officer, told analysts.

Air Canada lost $85 million or 31 cents per share in the seasonally weak first quarter ended March 31. That compared with a loss of $400 million or $4 per share a year ago.

Operating revenues rose to $2.5 billion from just under $2.4 billion.

Air Canada said it expects to lose about $20 million in operating profits from flight cancellations after the closure of European airspace for five days in April because of volcanic ash from the volcanic eruption in Iceland.

Manulife out of the red in Q1

TORONTO — Returned strength in equity markets helped insurance and wealth management giant Manulife Financial Corp. (TSX:MFC) post a first-quarter profit of $1.15 billion, reversing a year-earlier loss of $1.07 billion.

Canada’s largest insurance company said its earnings amounted to 64 cents per share, compared with a loss of 67 cents per share a year ago

Total revenue rose to $9.17 billion from $8 billion. Adjusted earnings from operations had been earlier forecast between $700 million and $800 million for each quarter in 2010, and Manulife reported the figure for the most recent quarter ahead of that range at $742 million.

Chief executive Donald Guloien said he was pleased with the quarter which was driven by strength in Canada and Asia, a recovery in the U.S. economy, and the company’s strong investment results relative to overall market conditions.

The company said its earnings benefited from stock market increases, which raised the value of its investment portfolio, and the positive impact of its bond trading and other investments.

“While we’re keeping our eye on the long game — and I don’t like to focus too much on any single quarter — it was pleasing to report our sales and new business embedded value results for the first quarter,” Guloien told analysts on a conference call.

Oil found in Falklands basin

LONDON — British oil and gas explorer Rockhopper Exploration PLC may have discovered oil off the coast of the Falkland Islands, raising excitement Thursday about what could potentially be the first viable find in the politically controversial field.

Shares in Rockhopper and other companies exploring the Falklands basin soared after its announcement, which was based on initial data from its Sea Lion platform.

The company said it found oil along intervals across 53 metres (174 feet), which was 25 metres (82 feet) deep at its thickest. It is now considering whether to plug the well, suspend it for future testing or drill an appraisal well.

“We are extremely excited by the results of this well,” said Rockhopper Managing Director Samuel Moody. “While we are presently acquiring additional data, current indications are that we have made the first oil discovery in the North Falkland Basin.”

Shares in Rockhopper surged 153 per cent to 93.5 pence ($1.40) on the London Stock Exchange. Desire Petroleum, which earlier this year abandoned a well in the basin, jumped 63 per cent to 61.5 pence. Falkland oil and Gas Ltd lifted 10.3 per cent to 150 pence and Borders and Southern rose 18 per cent to 54 pence.

However, exploration of the waters around the Falklands is controversial amid a long-running dispute between Britain and Argentina over ownership of the islands.

The U.N. General Assembly called for Argentina and Britain to negotiate sovereignty over the islands following a brief 1982 war for control, which Britain won. But Britain has ruled out any concessions involving the islands that its people have occupied since the early 1800s, and Buenos Aires still claims sovereignty.