Air Canada 2007 Annual Report Download - page 12

2007 Air Canada Annual Report
12
For the fourth quarter of 2007 and for the full year 2007, we reduced our CASM by 2.0% and 1.2%, respectively,
over the corresponding periods in 2006. Excluding fuel expense and special charges, CASM was down 3.9% from
the fourth quarter of 2006 and 0.4% from the full year 2006. This was achieved in spite of increasing pressure from
higher fuel prices, particularly in the second half of the year. We have continued to seek means to reduce our fuel
burden by negotiating competitive fuel rates from our suppliers and implementing fuel saving initiatives throughout
our operations. In addition, in order to manage our exposure to jet fuel prices and minimize volatility in operating
cash fl ows, we have focused on a structured fuel hedging program which is described in section 10 of this MD&A.
In 2008, in order to further reduce our operating costs to remain at a competitive level, our plan includes the
following initiatives:
■ The continued renegotiation of various supplier agreements;
■ The review of the base commission structure offered on various routes;
■ The continued implementation of our fuel effi ciency program which includes weight reduction initiatives
and optimum fl ight speed and altitude guidelines to maximize fuel savings without affecting on-time
performance or passenger connections.
Our fl eet renewal program is providing cost effi ciencies through fuel and maintenance savings driven by more
effi cient aircraft being brought into the fl eet. For example, the Boeing 777-300 aircraft is generating a 15% cost
saving per seat as compared to the Airbus 340-300 aircraft. At the same time as the new aircraft are being added to
our fl eet, we are removing older less effi cient aircraft. Refer to section 6 of this MD&A for additional information on
our fl eet.
■ Maintaining a high degree of web penetration and increasing direct distribution
Our transparent pricing strategy and our user friendly web platform have contributed to a high level of web
penetration which in turn has allowed us to reduce our distribution costs.
Air Canada maintains two websites, one for consumers and the other for travel agencies. Both websites offer the
same unique products. Customers continue to benefi t from the ability to check into Air Canada fl ights departing
from any Canadian city and from select US and select international cities to Canada up to 24 hours prior to departure
by using the web check-in facility provided on the Air Canada website. This has allowed us to generate cost savings
while increasing customer satisfaction.
Air Canada’s application programming interface, referred to as ac2u, allows third party booking platforms to access
Air Canada’s full range of products and attributes, including Flight Pass and “à la carte” pricing, in a simple, industry
standard format, while maintaining the branded integrity of the product. This effectively extends the reach of Air
Canada’s new revenue model further than what could be obtained by www.aircanada.com alone. The implementation
of the multi-year agreement announced on August 17, 2007 between Galileo International LLC (“Galileo”) and Air
Canada to provide Galileo-connected Canadian travel agents access to Air Canada’s full range of products and attributes
via ac2u will continue the growth of Air Canada’s direct distribution to both consumers and travel agents.
■ Further enhancing our product offering through a redesigned network and a renewed fl eet
Within North America, we adopted a demand-based network strategy. This has resulted in offering improved
frequencies on key routes, maintaining competitive frequencies on other routes and introducing new non-stop
routes thus serving customers to destinations where such demand was expected. We are implementing our network
redesign in the North American market through the use of large regional jet aircraft which have lower trip costs than
conventional narrow-body aircraft.