Air Canada Inc reported a 55 percent rise in operating earnings on Thursday, but said it expects higher fuel prices will add about C$800 million to operating costs in 2011.

Canada's biggest carrier said its operating income was C$73 million ($75.7 million)in the three months to end-June, compared with C$47 million in the same period a year earlier.

Air Canada reported a net loss of C$46 million, or 17 Canadian cents a share, compared with a net loss of C$318 million, or C$1.14 a share, in the year ago.

On an adjusted basis, it reported a loss of 20 Canadian cents a share.

Air Canada stock has lost 7 percent of its value in the past three months. Even so, it is off its lows for the year as worries about possible strikes by its unionized employees have ebbed somewhat after it signed new contracts with two of the five groups. ($1 = 0.965 Canadian Dollars)