Canadians’ diminishing appetite for post-pandemic travel helped nudge Air Canada to an $81-million first quarter loss, though the company boosted passenger revenues by nearly 11 percent year over year in the quarter ended March 31. The airline also says it is seeing “very strong signals” on business travel on the horizon.

“As expected, pent-up demand and ‘revenge travel’ factors are slowing over time,” said Mark Galardo, head of revenue and network planning, on a conference call with analysts Thursday.

“Winter is challenging every year,” added CEO Michael Rousseau, referring to what is traditionally the toughest quarter for North American carriers.

The thinner profit margins on fares in the quarter were paired with a 21% year-over-year rise in labour costs that drove up overall expenses, the company said.

Despite the dip, the airline reaffirmed plans to bolster capacity by between 6 and 8% this year, the Air Canada airline still expects to remain below its soaring 2019 capacity levels until 2025, five years after the COVID-19 pandemic first hammered the travel industry.

This year, the carrier hopes a long-awaited return in business travel will jump-start its earnings, despite a slow start.

“In Q1 it was relatively stable. We didn’t see a big growth, as some of our American peers did,” Galardo said. “But as we look late into the quarter and into Q1, we’re starting to see some very encouraging signals on corporate demand – to the tune of almost 10 to 20% greater on a year-over-year basis.”

Executives in the tech and transportation sectors in particular have returned to the skies in greater numbers, he said.

“It’s a little bit early to spike the ball on that, but we’re seeing some very, very strong signals.”

On Thursday, Air Canada reported that it swung to a loss in its first quarter compared to net income of $4 million in the same period a year earlier.

Operating revenue rose seven per cent year over year to $5.23 billion in the three months ended March 31.