Air Canada 2009 Annual Report Download - page 32

2009 Air Canada Annual Report
32
Food, beverages and supplies expense decreased 7% from 2008
In 2009, food, beverages and supplies expense of $291 million decreased $23 million or 7% from 2008 on a 5.2% decrease
in passenger traffi c. The impact of cost reduction initiatives and reduced contract rates were factors in the decrease to food,
beverage and supplies expense compared to the same period in 2008.
Communications and information technology expense increased 3% from 2008
In 2009, communications and information technology expense of $293 million increased $7 million or 3% from 2008.
The unfavourable impact of a weaker Canadian dollar versus the U.S. dollar on U.S. denominated expenses was partly offset
by a reduction in information technology project spend and savings achieved through renegotiation of a major information
technology supplier contract.
Commission expense decreased 4% from 2008
In 2009, commission expense of $186 million decreased $8 million or 4% from 2008. The impact of a 12.5% passenger
revenue decrease versus 2008 was partly offset by the combination of higher passenger sales and a change in commission
structure at Air Canada Vacations which resulted in an increase of $8 million to commission expense in 2009. In June 2009,
Air Canada introduced a 7% commission for Canadian travel agents to sell Tango fares for fl ights within Canada. Although
these initiatives have resulted in additional commission expense, overall, based on management’s analysis, the benefi ts of
these initiatives have outweighed the costs by enabling the Corporation to generate increased passenger revenues.
Other operating expenses decreased 4% from 2008
Other operating expenses amounted to $1,388 million in 2009, a decrease of $62 million or 4% from 2008. Factors
contributing to the year-over-year change in other expenses included:
• An increase in expenses related to ground packages at Air Canada Vacations of $27 million compared to 2008, which
was mainly due to higher passenger volumes.
• A reduction in credit card fees of $22 million compared to 2008, which was primarily the result of lower
passenger sales.
• A decrease in “remaining other expenses” of $75 million, which refl ected the impact of various cost reduction
initiatives and the impact of the capacity reduction. Favourable rate adjustments on foreign currency transactions
accounted for $37 million of the decrease to other operating expenses.
The following table provides a breakdown of the more signifi cant items included in other expenses:
Full Year Change
(Canadian dollars in millions) 2009 2008 $ %
Air Canada Vacations' land costs $ 250 $ 223 $ 27 12
Terminal handling 188 180 8 4
Credit card fees 175 197 (22) (11)
Building rent and maintenance 131 137 (6) (4)
Crew expenses (meals, transportation and hotels) 118 117 1 1
Miscellaneous fees and services 117 112 5 4
Remaining other expenses 409 484 (75) (15)
$ 1,388 $ 1,450 $ (62) (4)