Air Canada 2007 Annual Report Download - page 19

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Management’s Discussion and Analysis of Results and Financial Condition
19
Other passenger revenues increased 25.3% from the fourth quarter of 2006
Other passenger revenues (comprised of South Pacifi c, Caribbean, Mexico and South America) of $185 million in the fourth
quarter of 2007 increased $37 million or 25.3% from the fourth quarter of 2006. The fourth quarter of 2007 included a
favourable revenue adjustment of $26 million pertaining to a change in accounting estimates. Excluding this favourable
adjustment in the fourth quarter of 2007, other passenger revenues increased 7.9%. The following factors contributed to
the year-over-year change in fourth quarter other passenger revenues:
■ Traffi c growth of 11.2% on a capacity increase of 6.2% resulting in a passenger load factor improvement of
3.5 percentage points. Traffi c growth in these markets mainly refl ected higher capacity to traditional leisure
destinations and the addition of a new non-stop service from Vancouver to Sydney, Australia.
■ A yield decline of 2.9% (excluding the favourable adjustment of $26 million) refl ecting the large capacity increase
driven by Air Canada Vacations as well as the capacity growth on the South America routes. Pricing actions were
taken to stimulate traffi c on this additional capacity which adversely impacted the yield performance.
■ RASM growth of 1.6% (excluding the favourable adjustment of $26 million) due to the improvement in passenger
load factor.
Cargo revenues declined 14% from the fourth quarter of 2006
In the fourth quarter of 2007, total cargo revenue decreased $24 million or 14% from the fourth quarter of 2006.
Freighter revenues declined $20 million or 52% due to termination of Asian freighter operations. Non-freighter revenues
declined $4 million or 3%. System cargo yield per revenue ton mile improved 4%. The following factors contributed to the
year-over-year change in fourth quarter cargo revenues:
■ A system cargo traffi c decrease of 18% on a 6% reduction to available cargo capacity. Reduced freighter
operations accounted for three quarters of the traffi c reduction. In late 2006, the Corporation decided to
terminate MD-11 freighter operations to Asia due to inadequate fi nancial returns. One MD-11 freighter was
removed in November 2006 and a second freighter was removed at the end of June 2007, bringing an end
to Asia freighter operations. Air Canada continues to operate one chartered MD-11 freighter to Europe.
■ A decrease in North American non-freighter revenues of $3 million or 7% due in part to reduced cargo capacity.
■ A stronger Canadian dollar had a negative impact on freighter and non-freighter foreign currency
denominated revenues.
Other revenues were down 6% from the fourth quarter of 2006
Other revenues of $175 million in the fourth quarter of 2007 decreased $11 million or 6% from the fourth quarter of 2006.
The following factors contributed to the year-over-year change in fourth quarter other revenues:
■ Reduced ancillary passenger fee revenue of $17 million. Certain ancillary passenger fees, which were included in
other revenues in 2006, were included in passenger revenues in 2007.
■ Aircraft sublease revenues from third parties of $11 million in 2007 versus nil in 2006 partially offset
the above-noted decrease.