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8.1 Summary of Air Canada Services Segment Results
For the full year 2006, the Air Canada Services segment reported operating income of $114 million, a decrease
of $77 million from the operating income of $191 million recorded in 2005. Excluding the special charges of
$122 million for Aeroplan miles and labour restructuring, operating income increased $45 million over 2005.
EBITDAR decreased $15 million from 2005. Excluding the special charge for Aeroplan miles and the special
charge for labour restructuring, EBITDAR improved $107 million over 2005.
Passenger Revenues
System passenger revenues for 2006 increased $690 million or 8 percent, reflecting yield and traffic
improvements due to stronger market demand. The system yield improvement of 3 percent in 2006 was
principally due to fuel-related fare increases and increased fuel surcharges to offset higher fuel costs. A higher
average business class fare was also a factor in the yield increase. The impact of the fuel-related fare
increases, increased fuel surcharges and a higher business class fare was partially offset by the negative effect
of a stronger Canadian dollar on international, US transborder and domestic revenues, which accounted for
approximately $200 million in 2006. The August 10, 2006 terrorist threat in the United Kingdom and resultant
additional security measures also had an adverse impact in 2006. For 2006, traffic grew 5 percent on a
capacity increase of 4 percent over 2005 resulting in a passenger load factor improvement of 0.7 percentage
points over 2005. RASM increased 4 percent compared to 2005 due primarily to the growth in system yield and
partly to the improvement in passenger load factor.
The table below describes percentage changes in passenger revenues, capacity, traffic, passenger load factor,
yield and RASM for 2006 to 2005.
2006 Passenger Capacity Traffic Passenger
versus Revenue (ASMs) (RPMs) Load Factor Yield RASM
2005 % Change % Change % Change pp Change % Change % Change
Canada 8 4 4 (0.5) 4
3
US transborder 17 12 16 2.5 1
4
Atlantic 5 2 2 0.5 2
3
Pacific 2 - 1 1.4 1
3
Other 9 1 3 1.8 6
8
System 8 4 5 0.7 3
4
Domestic passenger revenues increased $262 million or 8 percent in 2006 compared to 2005 due to traffic
growth reflecting increased capacity and a 4 percent yield improvement. The suspension of Canjet’s scheduled
domestic operations in September 2006 also had a favourable impact on traffic. Yield increased 4 percent due
to fuel-related fare increases to offset higher fuel costs. Increased demand for the higher-priced Tango Plus
product was also a factor in the passenger yield growth over 2005. For 2006, domestic RASM rose 3 percent
as a result of the yield improvement partly offset by a decrease of 0.5 percentage points in passenger load
factor.
US transborder passenger revenues increased $268 million or 17 percent in 2006 compared to 2005 due to
increased capacity, much stronger market demand and a yield improvement of 1 percent over 2005. Traffic
increased 16 percent on a capacity increase of 12 percent resulting in a passenger load factor improvement of
2.5 percentage points. The growth in passenger traffic for 2006 was largely the 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. The yield improvement over 2005 reflected fuel-related fare increases partly offset by the adverse impact
of a stronger Canadian dollar and the impact of additional longer-haul flying to more key leisure destinations
attracting traffic with lower average yields. For 2006, US transborder RASM increased 4 percent over 2005 as
a result of the higher passenger load factor and, to a lesser extent, the yield growth.
Atlantic passenger revenues increased $83 million or 5 percent in 2006 compared to 2005 due to traffic growth
and increased fuel surcharges to offset higher fuel costs. In 2006, Atlantic yield improved 2 percent over 2005.
The favourable impact of increased fuel surcharges was partly offset by the adverse effect of a stronger
Canadian dollar. A higher average business class fare was also a factor in the yield increase. Traffic grew 2
percent on a 2 percent capacity growth resulting in a half percentage point improvement in passenger load
factor. Atlantic RASM increased 3 percent due to both the yield improvement and the higher passenger load
factor. Changes to Air Canada’s Atlantic network included the conversion of its service to Rome from summer
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