By John McCrank

TORONTO (Reuters) - Air Canada and
WestJet reported stronger quarterly operating results
Thursday, as Canada's two biggest airlines benefited from
more traffic, especially on international flights.

Air Canada, the country's No. 1 airline, posted a quarterly
net loss on Thursday, hurt by foreign exchange, but its
operating results improved as a rebounding economy boosted
high-end business travel.

"The recovery in business travel that we are seeing, I
think, is pretty typical of a pattern of recovery
post-recession," said Chris Murray, an analyst at PI
Financial.

Passenger revenue at the Montreal-based carrier rose 12
percent to C$256 million. Almost half of that came from higher
revenue from the more lucrative "premium cabin" sector, which
saw usage up 31 percent.

Calgary-based WestJet, which focuses more on leisure
travel, saw a big jump in profit from a year earlier, but said
that with uncertainty lingering in Canada's economy it would
focus on building its capacity on nondomestic routes.

"We are seeing continued strengthening in the Canadian
domestic market but it's a slow recovery," Gregg Saretsky,
WestJet's chief executive, said on a call with analysts. "It
hasn't been a fast rebound."

Citing the recent downward revision of Canadian GDP growth
estimates, WestJet said it deferred delivery from Boeing
of one plane to 2017 from 2011 and two other planes to 2017
from 2012. It will take delivery of six planes in 2011 and five
planes in 2012.

Air Canada also plans to look abroad for growth. It has
seen its Pacific routes surge, and said it plans on doubling
its capacity between Toronto and China this autumn.

JULY LOAD FACTORS

In July, load factors -- which measure the percentage of
available seats that were full -- were nearly 92 percent on the
Pacific routes, something analyst Cameron Doerksen at Versant
Partners said was "almost unheard of in the airline business."

He said that shows that momentum has carried into the third
quarter, which is seasonally the airline's strongest period.

Both airlines saw passenger revenue per available seat mile
(RASM), an industry performance benchmark, rise.

At Air Canada, RASM was up 6.6 percent.

That helped the airline turn in second-quarter operating
income of C$75 million, compared with an operating loss of
C$113 million a year earlier.

At WestJet, RASM was up 4 percent. While that was its first
year-over-year increase in the benchmark in eight quarters,
some analysts had forecast more.

Doerksen said he had expected a 5.5 percent increase. He
put the discrepancy down to lower prices on expansion routes.

"Clearly, on the international, they've added a lot of
capacity, and because they are new routes, they take a while to
mature and they tend to be lower priced and so, I think, that
had a bit of a drag on their unit revenue."

PI Financial's Murray said he had expected a 6.4 percent
increase in WestJet's RASM.

He pointed to Air Canada which said its Canada-only
per-unit revenue was up 7 percent.

"The majority of WestJet's traffic is still in Canada," he
said. "Now, don't get me wrong, but I would have thought they
would have done a little bit better."

WestJet said it expects its per-unit revenue to be positive
again in the current quarter.

FOREIGN EXCHANGE HIT

During the second quarter, a stronger Canadian dollar and a
number of other nonoperating items helped push Air Canada to a
second-quarter net loss of C$203 million ($199.6 million), or
72 Canadian cents a share.

Stripping out all the items, Doerksen said Air Canada's
results were positive.

"They appear to be on the right track," he said.

WestJet earned C$21 million, or 14 Canadian cents a share,
in the second quarter, up from C$9.2 million, or 7 Canadian
cents a share, last year.

Stripping out one-time items, the company's profit rose to
C$23.4 million, or 16 Canadian cents a share, from C$9.2
million, or 7 Canadian cents a share.

Murray said that because WestJet has far less foreign debt
than Air Canada, it is far less susceptible to fluctuations in
the Canadian dollar.

Shares of WestJet closed 1 Canadian cent lower at C$12.98
on the Toronto Stock Exchange Thursday. Air Canada ended
down 10 Canadian cents at C$2.20.

($1=$1.02 Canadian)
(Reporting by John McCrank; editing by Rob Wilson)