Air Canada 2007 Annual Report Download - page 27

Management’s Discussion and Analysis of Results and Financial Condition
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Cargo revenues declined 13% from 2006
Total cargo revenues of $550 million in 2007 decreased $79 million or 13% from 2006. Freighter revenues declined
$55 million or 39% mainly due to termination of Asian freighter operations. Non-freighter revenues declined $24 million
or 5%. System cargo yield per revenue ton mile increased 1%. The following factors contributed to the year-over-year
change in cargo revenues were:
■ A system cargo traffi c decrease of 14% on a 6% reduction to available cargo capacity. Reduced freighter operations
accounted for almost 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 freighter revenues for which operating expenses were down by a greater amount resulting in an
improved fi nancial result for freighter aircraft. Freighter revenues per unit of available capacity improved 9%
from 2006.
■ A decrease in North American non-freighter revenues of $15 million or 10% due in part to reduced cargo capacity
and reduced Pacifi c revenues in the fi rst half of 2007 due to weaker demand.
Other revenues grew 2% from 2006
Other revenues of $767 million in 2007 grew $17 million or 2% from 2006. The following factors contributed to the change
in other revenues:
■ Aircraft sublease revenues from third parties of $26 million in 2007 versus nil in 2006.
■ A growth in third party revenues at Air Canada Vacations of $17 million as a result of higher passenger volumes.
■ An increase in third party line maintenance revenues of $5 million.
■ A growth in third party ground handling revenues of $5 million.
■ Additional miscellaneous revenues of $15 million over 2006.
■ The increases noted above were almost totally offset by a reduction of $51 million in ancillary fee revenue. Certain
ancillary passenger fees were reclassifi ed to passenger revenues effective January 1, 2007. These revenues were
recorded in other revenues in 2006.
Operating expenses increased 2% from 2006
Operating expenses were $10,213 million in 2007, an increase of $163 million or 2% over 2006. CASM decreased 1.2%
while CASM, excluding fuel expense and special charges, was reduced by 0.4%. In our Third Quarter 2007 MD&A dated
November 8, 2007, we provided guidance that full year 2007 CASM, excluding fuel expenses, was expected to decrease
less than 1% from 2006. The decline in CASM, excluding fuel expense, for 2007 versus 2006 was in line with the guidance
provided at that time.