Air Canada 2008 Annual Report Download - page 22

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2008 Air Canada Annual Report
22
The above-noted increases were largely offset by an increase in average wages of approximately 2.5% over the fourth
quarter of 2007.
Employee benefits expense amounted to $75 million in the fourth quarter of 2008, a decrease of $16 million or 18% from
the fourth quarter of 2007, mainly due to reduced pension expense as a result of revised pension actuarial estimates made
as of January 1, 2008. Refer to section 9.6 of this MD&A for information on Air Canada’s pension funding obligations.
Airport and navigation fees decreased 3% from the fourth quarter of 2007
Airport and navigation fees of $230 million decreased $8 million or 3% from the fourth quarter of 2007, largely due
to reduced frequencies. Factors contributing to the year-over-year change in fourth quarter airport and navigation fees
included:
• Anoverallfrequencyreductionof4%fromthefourthquarterof2008,combinedwithchangesinscheduleand
aircraft types being operated to certain destinations, resulted in a net decrease to airport user fees.
• Lower rates for landing and general terminal fees.  Landing fees at PearsonAirport were reduced by 3.1% and
terminal charges were reduced by 4.7% effective January 1, 2008.
• TheimpactofaweakerCanadiandollarversustheUSdollarcomparedtothefourthquarterof2007partlyoffset
these reductions, accounting for an increase of $3 million to airport user fees.
Capacity purchase costs with Jazz increased 4% from the fourth quarter of 2007
Capacity purchase costs with Jazz, pursuant to Jazz CPA, amounted to $237 million in the fourth quarter of 2008 compared
to $227 million in the fourth quarter of 2007, an increase of $10 million or 4%. This year-over-year increase in capacity
purchase costs in the fourth quarter of 2008 was mainly due to the unfavourable impact of foreign exchange on US
denominated Jazz CPA expenses which accounted for an increase of $11 million compared to the same period in 2007. A
predetermined contractual increase in Jazz CPA rates of $3 million and other costs amounting to $2 million were partially
offset by the impact of reduced flying. Jazz ASM capacity was reduced by 3.4% in the fourth quarter of 2008 compared to
the fourth quarter of 2007.
Ownership costs increased 26% from the fourth quarter of 2007
Ownership costs, comprised of aircraft rent, depreciation and amortization expenses, of $254 million in the fourth quarter
of 2008 increased $52 million or 26% from the fourth quarter of 2007. Factors contributing to the year-over-year change
in fourth quarter ownership costs included:
• TheadditionofnewBoeing777andEmbraeraircrafttoAirCanada’soperatingeetwhichaccountedforanincrease
of $23 million.
• Anincreaseindepreciationexpenseforenginesandrotablesparepartsof$11millionoverthefourthquarterof
2007. A favourable adjustment of $9 million relating to rotable spare parts was recorded in the fourth quarter of
2007 versus a favourable adjustment of $2 million in the fourth quarter of 2008.
• TheimpactofaweakerCanadiandollarversustheUSdollarwhichaccountedforanincreaseof$12millionto
aircraft rent expense.
• Anincreaseindepreciationexpensesof$11millionrelatedtoAirCanada’saircraftinteriorrefurbishmentprogram.
• Otherfactorsaccountingforanetincreaseof$7million.
The above-noted favourable items were partially offset by the following:
• TheremovalofaircraftfromAirCanada’seetwhichaccountedforadecreaseof$6millioninaircraftrentand
depreciation and amortization expenses.
• Adecreaseof$6milliontoaircraftrentexpenseasaresultofreducedMD-11freighterying.