Air Canada (AC.TO) on Friday reported a quarterly profit compared with a loss a year earlier, when the company took a charge of $91 million related to pension funds.

Canada's biggest airline by market capitalization said its operating margins rose to 3.5 per cent in the fourth quarter from 0.5 per cent a year earlier. Air Canada spent 1.3 per cent less to fly a passenger.

The company has been focusing on improving margins amid stiff competition from WestJet Airlines (WJA.TO).

Air Canada has also been growing traffic through new routes and attracting international passengers to connect through its hubs in cities like Montreal and Toronto.

The company said it flew 9.9 per cent more passengers in the quarter ended Dec. 31.

The company reported net income of $8 million, or 2 cents per share, for the fourth quarter, compared with a loss of $179 million, or 66 cents per share, a year earlier.

The Montreal-based company's operating revenue rose 11.5 per cent to $3.82 billion.