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May 5 (Reuters) - Air Canada AC.TO on Friday reported a quarterly loss that was much smaller than expected, as it flew more passengers, offseting a sharp rise in fuel costs.
Passenger revenue increased 8.1 percent to C$3.1 billion ($2.3 billion) in the first quarter ended March 31, Canada's largest airline said, as passenger traffic rose 14 percent.
Air Canada has added more wide-body aircraft to its fleet that has helped the airline expand into new routes in Europe and Asia.
The company said adjusted cost per available seat mile (CASM) - a measure of how much an airline spends to fly a passenger - fell 5.7 percent in the quarter.
Air Canada said it expects adjusted CASM to fall 3-5 percent this year.
But fuel costs jumped 48 percent amid a rise in oil prices, which has weighed on profit margins at several airlines.
Air Canada said its net loss was C$37 million, or 14 Canadian cents per share, in the quarter, compared with a net income of C$101 million, or 35 Canadian cents per share, a year earlier.
Excluding one-time items, the company lost 32 Canadian cents per share. Analysts on average had expected a loss of 61 Canadian cents per share, according to Thomson Reuters I/B/E/S.
The Montreal-based airline's operating revenue climbed 8.9 percent to C$3.64 billion. = 1.3776 Canadian dollars)