Air Canada has reported first quarter adjusted net income of $122 million or $0.41 per diluted share compared to an adjusted net loss of $132 million or $0.46 per diluted share in the first quarter of 2014, an improvement of $254 million or $0.87 per diluted share. EBITDAR amounted to $442 million compared to EBITDAR of $147 million in the same quarter in 2014, an increase of $295 million or 200 per cent year-over-year. On a GAAP basis, Air Canada reported operating income of $200 million in the first quarter of 2015 compared to an operating loss of $62 million in the first quarter of 2014, an improvement of $262 million. The airline recorded an operating margin of 6.2 per cent compared to a negative operating margin of 2.0% in the first quarter of 2014, an improvement of 8.2 percentage points.
"I am delighted to report the best first quarter financial performance in Air Canada's history," said Calin Rovinescu, President and Chief Executive Officer. "Record results in adjusted net income, operating income, operating margin, EBITDAR, passenger revenues and passenger load factor for the quarter all underscore our team's success in executing on our value-enhancing strategies. We have continued to see a strong demand environment, and in the first quarter our margins expanded dramatically, bolstered by strong cost control, with adjusted CASM declining 1.8 per cent despite the weaker Canadian dollar, and solid traffic growth particularly on leisure sun routes.
"While fuel prices remain volatile, in 2015 we expect to continue to expand margins, increase adjusted net income, strengthen our balance sheet and create value for shareholders. We also expect to set a new record for second quarter operating income this year; however year-over-year improvements will likely be modest when compared to the first quarter improvement. This is due to a particularly strong revenue performance in the second quarter of 2014 and higher projected maintenance expense, the absence of favourable tax-related provisions adjustments of $41 million recorded in the second quarter of 2014, as well as higher relative fuel prices in the second quarter versus the first quarter of 2015.
In the first quarter of 2015, on capacity growth of 9.3 per cent, system passenger revenues of $2.786 billion increased $178 million or 6.9 per cent from the first quarter of 2014. The increase in system passenger revenues was due to traffic growth of 10.9 per cent partly offset by a yield decline of 4.2 per cent.
Passenger revenue per available seat mile (PRASM) decreased 2.7 per cent from the first quarter of 2014 as the lower yield was partly offset by a passenger load factor improvement of 1.2 percentage points.
In the first quarter of 2015, operating expenses of $3.049 billion decreased $78 million or 2 per cent from the first quarter of 2014 on capacity growth of 9.3 per cent. The decline in operating expenses reflected the impact of lower jet fuel prices largely offset by the impact of the weaker Canadian dollar and capacity-related cost increases. The unfavourable impact of a weaker Canadian dollar on foreign currency denominated operating expenses (mainly U.S. dollars) in the first quarter of 2015, when compared to the first quarter of 2014, increased operating expenses by approximately $135 million. This currency impact was partly offset by a favourable currency impact of $38 million on passenger revenues and realized currency derivatives gains of $51 million.
Air Canada's adjusted cost per available seat mile (adjusted CASM), which excludes fuel expense, the cost of ground packages at Air Canada Vacations and unusual items, decreased 1.8 per cent from the first quarter of 2014, better than the 0.5 to 1.5 per cent increase projected in Air Canada's news release dated February 11, 2015.
The better than expected adjusted CASM performance was largely due to lower than anticipated aircraft maintenance expenses, primarily driven by the acceleration of aircraft lease extensions and certain favourable lease return condition provision adjustments, reducing maintenance expenses by $22 million in the first quarter of 2015. It was also impacted by the impact of the new Jazz CPA, effective January 1, 2015, whereby certain costs, such as ground handling services performed by Air Canada, are no longer recovered from Jazz and passed through to Air Canada under the Jazz CPA as capacity purchase fees, thereby reducing both other revenues and capacity purchase fees; and lower than expected employee benefits expense due to lower benefit payments and improved plan experience.