Air Canada 2008 Annual Report Download - page 20

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2008 Air Canada Annual Report
20
to fourth quarter 2008 other passenger revenues compared to the fourth quarter of 2007.
• Inthefourthquarterof2008,adjustedRASMincreased6.5%fromthefourthquarterof2007duetothegrowthin
yield.
Cargo revenues decreased 20% from the fourth quarter of 2007
Fourth quarter 2008 cargo revenues amounted to $113 million and were $29 million or 20% below the fourth quarter of
2007. Reduced freighter revenues accounted for almost two thirds of the revenue decrease due to cancellation of freighter
flying in 2008. Non-freighter revenues decreased $10 million or 8%, mainly reflecting lower revenues in the domestic, US
transborder and Pacific markets. Freighter revenues declined $19 million as no MD-11 freighter aircraft were operated in
the fourth quarter of 2008 versus one MD-11 freighter operated in the same period in 2007. System cargo yield per revenue
ton mile improved 7%, mainly reflecting a positive currency impact and, to a lesser extent, increased fuel surcharges. Factors
contributing to the year-over-year change in fourth quarter cargo passenger revenues included:
• Inthefourthquarterof2008,systemtrafcdeclined25%fromthefourthquarterof2007,mostlyasaresultofthe
termination of MD-11 freighter operations. Traffic on non-freighter aircraft decreased by 14% due to reduced cargo
volumes in the domestic market with the termination of the Canada Post contract in mid-September 2008, and in
the Pacific and US transborder markets mainly due to reduced capacity. Weakening demand for air cargo was also a
factor in the decrease in cargo traffic.
• Inthe fourthquarter of2008,a weakerCanadiandollar (with correspondingstronger foreigncurrencies)hada
positive impact of approximately $9 million on the value of foreign currency denominated revenues.
Other revenues increased 16% from the fourth quarter of 2007
Other revenues of $203 million in the fourth quarter of 2008 increased $28 million or 16% from the fourth quarter of
2007, largely due to an increase of $21 million in aircraft sublease revenues, of which $5 million was due to the favourable
impact of foreign exchange on US denominated sublease revenues. Other factors amounted to a net increase of $7 million.
Excluding fuel expense, CASM increased 9.9% from the fourth quarter of 2007
Operating expenses were $2,644 million in the fourth quarter of 2008, an increase of $203 million or 8% from the fourth
quarter of 2007. As Air Canada incurs significant expenses in US dollars such as fuel, aircraft maintenance and airport
user fees, the significantly weaker Canadian dollar versus the US dollar was a major contributing factor to the increase in
operating expenses in the fourth quarter of 2008, accounting for approximately $180 million in additional expense.
Including fuel expense, CASM increased 17.4% over the fourth quarter of 2007. Excluding fuel expense, CASM increased
9.9% over the fourth quarter of 2007. Factors contributing to the year-over-year change in fourth quarter CASM included:
• AsignicantlyweakerCanadiandollarversustheUSdollarcomparedtothefourthquarterof2007accountedfor
over 40% of the CASM increase (including fuel expense) in the fourth quarter of 2008.
• HigherownershipcostsreectingAirCanada’sinvestmentinnewaircraftandtheaircraftinteriorrefurbishment
program in the fourth quarter of 2008.
• Thecapacityreductionwasafactorintheyear-over-yeargrowthinCASMasAirCanada’scoststructureissuch
that its fixed costs do not fluctuate proportionately with changes in capacity in the short term. In addition, certain
variable costs, such as labour, are progressively being reduced, however, not at the same rate as the capacity reduction.
• Adecreaseof5.4%inaircraftutilizationandareductionof2.8%inaveragestagelengthwerealsocontributing
factors in the year-over-year increase in CASM compared to the fourth quarter of 2007.
The 9.9% increase in CASM, excluding fuel expense, was in line with the projected CASM, excluding fuel expense, provided
in the Corporation’s news release dated November 7, 2008 in which CASM, excluding fuel expense, was projected to
increase between 9 to 10% compared to the same period in 2007.