Air Canada 2008 Annual Report Download - page 91

Consolidated Financial Statements and Notes
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1. BASIS OF PRESENTATION, NATURE OF OPERATIONS AND LIQUIDITY RISK
A) BASIS OF PRESENTATION
The accompanying consolidated financial statements are of Air Canada (the “Corporation”), a majority-owned subsidiary of
ACE Aviation Holdings Inc. (“ACE”). The term “Corporation” refers to, as the context may require, Air Canada and / or one
or more of Air Canada’s subsidiaries.
These consolidated financial statements are expressed in millions of Canadian dollars and are prepared in accordance with
generally accepted accounting principles (“GAAP”) in Canada.
Certain comparative figures have been reclassified to conform to the financial statement presentation adopted in the
current year.
B) NATURE OF OPERATIONS
The consolidated financial statements of Air Canada include Air Canada’s wholly owned subsidiaries of Air Canada Cargo
Limited Partnership (“Air Canada Cargo”), ACGHS Limited Partnership (“Air Canada Ground Handling Services” or “ACGHS”)
and Touram Limited Partnership (“Air Canada Vacations”). These consolidated financial statements also include certain
aircraft and engine leasing entities and fuel facility corporations, which are consolidated under Accounting Guideline 15 –
Consolidation of Variable Interest Entities (Note 2z).
Jazz Air LP (“Jazz”) is consolidated within Air Canada for the period to May 24, 2007 (Note 2d).
Air Canada is Canada’s largest domestic and international airline and the largest provider of scheduled passenger services in
the Canadian market, the Canada-US transborder market as well as the international markets to and from Canada. Certain
of the scheduled passenger services offered on domestic and Canada-US transborder routes are provided by Jazz through
the Jazz CPA. Through Air Canada’s global route network, virtually every major market throughout the world is served either
directly or through the Star Alliance network. In addition, Air Canada provides certain charter services.
Air Canada Cargo offers air cargo services on domestic and US transborder routes using cargo capacity on aircraft operated
by Air Canada and Jazz in these markets. Air Canada offers international cargo services on routes between Canada and
major markets in Europe, Asia, South America and Australia using cargo capacity on Boeing 777 and other wide body aircraft
operated by Air Canada.
Air Canada Ground Handling Services provides passenger handling services to Air Canada, Jazz and other airlines with a
primary focus on Canadian stations. Services covered include passenger check-in, gate management, baggage and cargo
handling and processing, cabin cleaning, de-icing as well as aircraft ramp services.
Air Canada Vacations is one of Canada’s leading tour operators. Based in Montreal and Toronto, it operates its business in
the outgoing leisure travel market (Caribbean, Mexico, Europe, South America and USA) through developing, marketing and
distributing vacation travel packages and services through a network of independent travel agencies in Canada as well as
through the Air Canada Vacations website, aircanadavacations.com.
C) LIQUIDITY RISK
Along with many airline carriers globally, Air Canada faced a number of significant challenges in 2008 as a result of volatile
fuel prices and the weakening demand for air travel. With the expectation of a continuing recession in 2009, the industry will
continue to face significant challenges throughout 2009, including Air Canada. The recession is expected to put significant
pressures on passenger and cargo revenues for many airlines, including Air Canada. At the same time, it is expected that
lower fuel prices in 2009 and capacity adjustments made in 2008 as a result of the high fuel prices will provide some relief.
Air Canada continues to be significantly leveraged requiring continuing interest payments and debt payments, which are
FortheYearsEndedDecember31,2008and2007(Currenciesinmillions–Canadiandollars)