MONTREAL -- Air Canada says it posted the best annual financial results in its 77-year history in 2014, which the airline's chief executive described as a "break out year."

The Montreal-based company's annual revenues grew 7.1 per cent or $890 million to $13.3 billion, as Air Canada (TSX:AC) flew a record 38.5 million passengers and saw ancillary revenues increase 10 per cent, from checked baggage and other fees.

Its net income increased 10-fold to $105 million for the 12 months ended Dec. 31 and its adjusted net income -- which excludes a number of onetime and non-operating items -- grew 56 per cent to $531 million.

The strong results allowed the airline to pay out $46 million in profit sharing to employees.

Air Canada CEO Calin Rovinescu told analysts Wednesday that 2014 "showed what we are truly capable of."

During the fourth quarter, Air Canada posted a $100-million net loss but the airline focused more on adjusted net income, which soared to $67 million or 23 cents per share. The adjusted profit was one cent below analyst forecasts but up from $3 million or one cent per share in the fourth quarter of 2013.

Before the adjustments, Air Canada's net loss in the quarter was equal to 35 cents per diluted share, which compared with a loss of two cents per share in the fourth quarter of 2013.

The adjusted net income excludes a $115-million foreign exchange loss that was about double the $55 million loss recorded a year ago. It also excludes a $30-million one-time hit related to a new contract with Air Canada's pilots, ratified in October, and an $82-million unusual gain in 2013 from amendments to benefit plans.

Revenue for the three months ended Dec. 31 improved 7.2 per cent to $3.1 billion.

On the Toronto Stock Exchange, Air Canada (TSX:AC) shares fell 9.2 per cent, losing $1.22 at $12.03.

Walter Spracklin of RBC Capital Markets called the sell-off "a knee-jerk reaction" to the fourth quarter results and described the lower stock price as a buying opportunity.

"We do not consider these to have been structural or impacting the company's very favourable long-term trends," Spraklin wrote in a report.

Air Canada -- which is the country's largest airline -- flew three million more passengers last year, including three million on its low-cost Rouge subsidiary. It saw mainly U.S. traffic flying through its Canadian hubs to overseas destinations increase 23 per cent and saw business travel increase.

It said there has been any weakening of demand in oil producing provinces and it expects to realize significant cost savings in the coming year from a drop in fuel prices, one of the biggest expenses for any airline.

The price of a benchmark barrel of crude oil -- used to make jet fuel, among other things -- began to drop sharply near the middle of the 2014 fourth quarter on its way to a six-year low in early 2015. It's currently trading at about US$50 a barrel. The airline expects fuel will hover around 67 cents per litre or US$78 per barrel in 2015.

Air Canada's fuel expenses increased by five per cent in the quarter and six per cent for the year, as more fuel was used. The weaker loonie compared with the U.S. dollar offset the benefit from a 16 per cent decrease in jet fuel prices during the quarter and six per cent drop for the year.

Air Canada's domestic registered pension plans are forecast to have a $780 million surplus, up from an $89 million surplus a year ago and a turnaround from a $4.2 billion deficit in 2012.