MONTREAL -- Air Canada's revenues this year will be more than $1 billion lower than in 2002, mostly because of the impact of SARS, airline president and CEO Robert Milton said yesterday. In May, the struggling airline's revenues were about $200 million lower than the same month last year and June looks to be just as bad.

"We currently expect the 2003 year over year revenue shortfall to be significantly in excess of $1 billion with no expectation of meaningful recovery before the third quarter of 2004," Milton said.

The company, Canada's largest airline, has been operating under court protection from its creditors since April 1. It had $12.9 billion in long-term debt and leases at the end of 2002 and has been losing an average of $5 million a day in May and early June.

Passenger traffic on the main Air Canada airline fell 26.4 per cent in May compared with the same month last year, while its regional subsidiary, Jazz, had 9.5 per cent fewer revenue passenger miles.

A major cause of Air Canada's reduced traffic is concern over severe acute respiratory syndrome, or SARS, an infectious disease that has discouraged travel to Toronto -- the airline's main hub -- and key Asian destinations.

"As can be seen from our results, the SARS outbreak continues to have a major negative impact on traffic, not only on our Asian routes but on our entire network, and in particular, our main hub at Toronto," Milton said.

"Advance international bookings for the summer are weak and we expect that the entire Canadian tourism industry is under similar pressure," he added.