Air Canada 2008 Annual Report Download - page 26

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2008 Air Canada Annual Report
26
In 2008, Air Canada reported an operating loss, before a provision for cargo investigations, of $39 million compared to
operating income of $433 million in 2007, a deterioration of $472 million. An increase in operating revenues of $436
million or 4% was more than offset by a fuel expense increase of $867 million or 34%.
In 2008, EBITDAR, before a provision for cargo investigations, amounted to $934 million compared to EBITDAR of $1,263
million in the same period in 2007, a decrease of $329 million.
System passenger revenues increased 4.1% over 2007
In response to historically high fuel prices, on June 17, 2008, Air Canada announced capacity reductions for the fall and
winter schedule. In the first half of 2008, Air Canada increased its capacity by 3.4% from the first half of 2007. In the
second half of 2008, Air Canada reduced its capacity by 5.4% compared to the same period in 2007. Total system ASM
capacity for the full year 2008 decreased 1.2% from the full year 2007.
Compared to 2007, passenger revenues increased $384 million or 4.1% to $9,713 million in 2008 mainly due to increased
fares and fuel surcharges to partially offset higher fuel prices. Passenger revenue growth was reflected in all markets with
the exception of the US transborder market which showed a relatively small reduction in passenger revenues. Factors
contributing to the year-over-year change in system passenger revenues included:
• In2008,systemyieldimproved4.3%from2007,reectingyieldgrowthinallmarkets.Theyieldimprovementwas
mainly due to higher fares and increased fuel surcharges to partially offset higher fuel prices. A more favourable fare
mix in both the economy and premium cabins was also a factor in the yield improvement from 2007.
• AstrongerCanadiandollar in 2008, which lowers the Canadiandollar valueof sales inforeigncountries,had a
negative impact on foreign currency denominated revenues, accounting for a decrease of $111 million to 2008
passenger revenues compared to 2007.
• Inthersthalfof2008,capacityincreased3.4%comparedtothersthalfof2007.Startinginthethirdquarterof
2008, Air Canada began reducing its capacity through fewer frequencies on existing routes and through the increased
use of smaller aircraft in the fleet. In the last half of 2008, capacity was reduced by 5.4% compared to the last half
of 2007. Overall, in 2008, system capacity was reduced by 1.2%, reflecting capacity decreases in all markets with
the exception of other markets.
• In2008,atrafcdeclineof0.2%waslessthanthecapacitydecreaseof1.2%resultingina0.8percentagepoint
improvement in passenger load factor from 2007. Passenger load factor improvements were recorded in the
international markets while decreases in passenger load factor were recorded in the domestic and US transborder
markets. However, in the fourth quarter of 2008, Air Canada further reduced capacity to better match passenger
demand which resulted in year-over-year improvements in passenger load factors in these markets.
• In2008,RASMincreased5.3%from2007duetothegrowthinyieldand,toalesserextent,thepassengerloadfactor
improvement. RASM improvements were reflected in all markets.
The table below describes year-over-year percentage changes in revenues, capacity, traffic, passenger load factor, yield and
RASM.
2008
Versus
2007
Passenger
Revenue
% Change
Capacity
(ASMs)
% Change
Traffic
(RPMs)
% Change
Passenger
Load Factor
pp Change
Yield
% Change
RASM
% Change
Canada 3.5 (0.2) (0.4) (0.2) 3.8 3.6
US transborder (0.5) (7.4) (7.5) (0.1) 7.5 7.4
Atlantic 4.3 (2.5) (0.4) 1.8 4.6 6.9
Pacific 3.0 (4.4) (2.1) 2.0 5.1 7.7
Other 21.2 16.4 18.2 1.2 2.5 4.1
System 4.1 (1.2) (0.2) 0.8 4.3 5.3
The system ASM capacity decrease of 1.2% in 2008 compared to 2007 was in line with the 1.0% to 1.5% ASM reduction
projected in the Corporation’s news release dated November 7, 2008. The domestic ASM capacity decrease of 0.2% was
also in line with the 0.0% to 0.5% ASM capacity reduction projected in the Corporation’s news release dated November 7,
2008.