Air Canada 2012 Annual Report Download - page 23
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2012 Management’s Discussion and Analysis
23
In 2012, the impact of scheduled maintenance rate increases related to Air Canada’s Boeing 777 aircraft, the impact of Air
Canada having to replace a leased engine which was beyond economical repair, a higher volume of engine maintenance
activity driven mainly by the timing of scheduled engine maintenance activities, and an unfavourable currency impact were
largely offset by the impact of significantly lower rates for airframe and engine maintenance year-over-year. Following Aveos’
CCAA filing in March 2012 and the subsequent termination of all maintenance agreements between Air Canada and Aveos, Air
Canada concluded new agreements on a cost competitive basis with new maintenance service providers.
Sales and distribution costs decreased 1% from 2011
In 2012, sales and distribution costs of $603 million decreased $9 million or 1% from 2011 on passenger revenue growth of
5.2%. An increase in transaction fees paid to global distribution services providers and growth in credit card fees, which was in
line with sales and revenue growth, were more than offset by lower commission expense at Air Canada, in part due to
program changes, and by a decrease in sales and distribution costs at Air Canada Vacations.
Food, beverages and supplies expense increased 5% from 2011
In 2012, food, beverages and supplies expense of $291 million increased $13 million or 5% from 2011, largely due to
passenger traffic growth, including in the premium class cabin.
Other operating expenses increased 6% from 2011
In 2012, other operating expenses of $1,305 million increased $75 million or 6% from 2011.
The following table provides a breakdown of the more significant items included in other expenses:
Full Year Change
(Canadian dollars in millions) 2012 2011 $ %
Air Canada Vacations' land costs $319 $ 307 $12 4
Terminal handling 184 193 (9) (5)
Building rent and maintenance 124 127 (3) (2)
Crew cycle 116 115 1 1
Miscellaneous fees and services 138 108 30 28
Remaining other expenses 424 380 44 12
Other operating expenses $1,305 $ 1,230 $75 6
Factors contributing to the year-over-year change in full year Other expenses included:
An increase in “remaining other expenses” of $44 million or 12% which was largely driven by expenses, such as engine
and rotable equipment rentals, resulting from the Aveos closure.
An increase of $30 million or 28% in miscellaneous fees and services which included fees incurred in relation to various
corporate strategic initiatives, including those related to cost saving and revenue generating initiatives.
An increase of $12 million or 4% in expenses related to ground packages at Air Canada Vacations which was mainly due
to a higher cost of ground packages.