CALGARY, Alberta (Reuters) - Shares in Air Canada (ACa.TO: Quote, Profile, Research) slipped nearly 7 percent on Friday after an analyst put a "sell" recommendation on the stock and warned that rising fuel prices could slash profit at the country's largest airline.

Jacques Kavafian, an analyst at Research Capital, moved his recommendation down from a "buy" and lowered his target for the shares to C$6 from a previous C$14.50.

Air Canada class A shares were down 48 Canadian cents to C$7.97 on the Toronto Stock Exchange early Friday afternoon after earlier touching C$7.87. The shares have dropped 48 percent in the past 12 months.

Kavafian said in a note to clients that he expected Air Canada to post a loss of 71 Canadian cents a share when it reports its first quarter results on Thursday.

The average loss forecast for the period among analysts polled by Reuters Estimates is 77 Canadian cents a share.

Kavafian wrote that Air Canada's fuel costs have likely risen to 95 Canadian cents a litre from 77 Canadian cents, and that maintenance costs have also climbed.

He said that while the airline and it main rival WestJet Airlines Ltd (WJA.TO: Quote, Profile, Research) could raise fares to compensate for higher fuel costs, he noted it's harder to do that in the cutthroat international market.

"Air Canada may have difficulty raising fares on approximately half of its business that is generated from international markets," Kavafian wrote. "Its main competitor, WestJet, generates 100 percent of its revenue from North America where it is easier to raise fares."

Kavafian suggested Air Canada can offset higher costs by boosting existing fees for cancellations or ticketing changes, and introducing new charges, such as charging passengers for a second checked bag. It can also boost fares and cut capacity.