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7.1 Summary of Air Canada Services Segment Results
The Air Canada Services segment reported an operating loss of $5 million in Quarter 4 2006, an improvement
of $86 million from the operating loss of $91 million recorded in Quarter 4 2005. EBITDAR increased $100
million over Quarter 4 2005.
Passenger Revenues
System passenger revenues in Quarter 4 2006 increased $122 million or 6 percent over Quarter 4 2005,
reflecting system traffic and yield improvements due to stronger market demand. The system yield
improvement of 1 percent in Quarter 4 2006 over the same period in 2005 was principally due to fuel-related
fare increases and increased fuel surcharges to offset higher fuel costs and, to a lesser extent, a higher average
business class fare. The yield increase was partly offset by the negative effect of a stronger Canadian dollar on
international, US transborder and domestic revenues. In Quarter 4 2006, traffic grew 5 percent on a capacity
increase of 4 percent over Quarter 4 2005, resulting in a passenger load factor increase of 1.1 percentage
points. RASM increased 2 percent compared to Quarter 4 2005 due to both the improvement in system
passenger load factor and the growth in yield.
The table below describes quarter-over quarter percentage changes in passenger revenues, capacity, traffic,
passenger load factor, yield and RASM.
Quarter 4 2006 Passenger Capacity Traffic Passenger
versus Revenue (ASMs) (RPMs) Load Factor Yield RASM
Quarter 4 2005 % Change % Change % Change pp Change % Change % Change
Canada 6 4 6 1.7 -
2
US transborder 10 11 15 2.0 (4) (1)
Atlantic 4 2 2 - 2
2
Pacific 1 - - 0.1 1
1
Other 6 1 5 3.0 1
5
System 6 4 5 1.1 1
2
Domestic passenger revenues increased $54 million or 6 percent in Quarter 4 2006 compared to Quarter 4
2005 due to traffic growth. Yield was essentially unchanged from the same period in 2005. Traffic grew 6
percent on a capacity increase of 4 percent resulting in a passenger load factor improvement of 1.7 percentage
points. Capacity increases were largely on transcontinental services. The suspension of Canjet’s scheduled
domestic operations in September 2006 also had a favourable impact on traffic in Quarter 4 2006. Domestic
RASM increased 2 percent compared to Quarter 4 2005 due to the improvement in domestic passenger load
factor.
US transborder passenger revenues rose $41 million or 10 percent in Quarter 4 2006 compared to the
corresponding period in 2005 due to an increase in traffic, the result of more capacity, a stronger market
demand and additional fuel-related fare increases to offset higher fuel costs. Yield decreased 4 percent in
Quarter 4 2006, reflecting a growth over 2005 in longer-haul flying to key leisure destinations. Long-haul flights
generally have a lower yield per revenue passenger mile than short-haul flights. When measured on a per mile
basis, the average fare paid on long-haul flights is relatively lower than on short-haul flights. At the same time,
since the costs of ground handling, take-off and landing are similar for both short and long-haul flights, unit
costs per ASM are normally lower for long-haul flights due to distance flown. The growth in passenger traffic of
15 percent in Quarter 4 2006 was largely a result of increased capacity on routes to Las Vegas, San Francisco
and Los Angeles and the addition of the Toronto-San Diego route in June 2006. US transborder RASM
decreased 1 percent over Quarter 4 2005 as a 2.0 percentage point improvement in passenger load factor was
more than offset by the decline in yield.
Atlantic passenger revenues increased $15 million or 4 percent in Quarter 4 2006 compared to the
corresponding period in 2005 due equally to yield improvement and traffic growth. Yield improved 2 percent
over the corresponding period in 2005 largely due to increased fuel surcharges to offset higher fuel costs.
Traffic growth was essentially in line with capacity growth resulting in a passenger load factor unchanged from
the same period in 2005. Atlantic RASM increased 2 percent due to the yield improvement.
17
Management's Discussion and Analysis of Results and Financial Condition