Air Canada 2012 Annual Report Download - page 5

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customer choice was the launch of Air Canada rougeTM, a leisure
carrier that will offer more affordable travel options and
destinations. To measure the response to these and other
initiatives, we will continue to regularly survey customers and
monitor social media, something we are better able to do given
300 per cent growth in our Facebook audience and more than
100 per cent growth in our Twitter following during the year. In
all, customer sentiment tracked by social media improved
meaningfully, from 60 per cent negative to 60 per cent positive
during 2012.
Another means to engage customers is by adding new
destinations and this dovetails into our second priority:
establishing Air Canada as an international powerhouse. In 2012
we announced routes to Istanbul, as well as a new Toronto-
Seoul service. We are upgrading Calgary-Tokyo service to daily
and we are bolstering our Asia-Pacific presence overall by adding
seven flights a week to Beijing. This summer we will have
11 daily departures to Asia or more than 43,000 seats a week
crossing the Pacific. With the launch of Air Canada rougeTM
Edinburgh and Venice will also be added to the Air Canada
network.
To support our international strategy, with its focus on high-
growth economies and popular leisure destinations, we
undertook our largest wide-body expansion in a decade by
firming orders for five Boeing 777-300ER aircraft. Our efforts
thus far have produced an increase of close to 160 per cent in
international traffic connecting through our Toronto Lester
B. Pearson International Airport hub since 2009. Recent
streamlining of baggage handling for U.S.-bound connecting
customers at Pearson will help position the airport to become
the prime gateway for North America, with the easiest transit
and, for many international customers, the fastest elapsed travel
times.
We are helped enormously in our international strategy by our
membership in Star Alliance as it strengthens our market
presence in Central America, Europe, the Middle East, Africa and
India. Additionally, our joint venture with our partners United
Airlines and Lufthansa is creating greater revenue opportunities
across the Atlantic. And regulatory approval in 2012 of our
transborder joint venture with United Airlines holds out new
possibilities in the U.S., the world’s largest airline market.
In order to capitalize on these advantages, however, Air Canada
must be cost competitive and maximize revenue, which is our
third priority. Following on the $530 million in benefits from the
Cost Transformation Program completed in 2011, we continue
to seek savings company-wide through changes in such areas as
fuel consumption, credit card processing fees and through a
special focus on On-Time Performance, which will not only
reduce costs but also improve customer engagement.
More fundamentally, we have implemented fleet changes in
response to new competition, notably by deploying
Q-400 aircraft in Western Canada and shifting the smallest
aircraft in the mainline fleet, the Embraer 175, to a lower cost
regional operator. Air Canada also created rougeTM in 2012 to
serve leisure destinations more profitability with a lower cost
structure largely made possible by new contractual agreements
with our employees. Labour agreements now in place with our
Canadian unions provide for other savings too, both through more
efficient use of manpower and through new pension plan
arrangements, still subject to regulatory approval, that, along with
changes to defined benefit plans for management employees, are
expected to reduce our pension solvency deficit by an estimated
$1.1 billion (based on 2012 actuarial valuations). Other significant
savings are anticipated from new third party maintenance
contracts following Aveos’s closure last year.
Binding all these initiatives together is the shared commitment
of Air Canada’s 27,000 employees, which is why our fourth
priority is culture change. Although our numerous awards speak
to our employees’ dedication, we nonetheless seek to instill a
greater sense of entrepreneurship, empowerment and
engagement. Among other things, we have recalibrated
employee incentive plans to reward performance, introduced
new talent management tools, eliminated layers of bureaucracy
and placed renewed emphasis on the importance and benefits of
achieving financial goals.
There is no doubt that the members of the Air Canada family
care deeply about our communities and the world around us
and it is their expectation that Air Canada share these concerns.
To better meet these responsibilities, in 2012 we established the
Air Canada Foundation, an independent, registered charity to
better deliver our community investment programs with their
focus on disadvantaged children. During the year, the
Foundation provided support valued at close to $4 million in
Aeroplan Miles, aircraft for Dreams Take Flight, cash donations
as well as promotional tickets.
There were many other expressions of employee engagement
during the year, such as fundraising for fellow workers afflicted
by Hurricane Sandy, our sponsorship and support of Canadian
athletes at the 2012 Summer Olympic and Paralympic Games,
and on the environmental front with Air Canada operating two
biofuel flights. To provide a fuller accounting of our company’s
activities we produced Citizens of the World, our first Corporate
Sustainability Report, which details our efforts in the areas of
safety, the environment, our employees and communities. It is
our intent to regularly publish updated reports to quantify our
progress with respect to sustainable practices.
In conclusion, 2012 was a year of considerable achievement. We
are mindful these results merely provide a glimpse of our
destination – they do not mark our arrival at it – and there
remains much distance to travel. We know that in order to
become consistently, sustainably profitable we must adhere to
our strategy and continue re-engineering our company. At the
same time, we will not allow our priorities to become
limitations and we will continue to innovate, seize opportunities
and respond to industry events. Such adaptability has been at
the core of Air Canada’s success for 75 years and will remain our
touchstone in the future.
I wish to express my gratitude to our employees who devoted
themselves to outstanding customer service and safe operations
throughout 2012. As well, I also thank our customers,
shareholders, suppliers and other partners for their unwavering
loyalty. Our transformation thus far has only been possible due
to the support of these important stakeholders and it is our
determination to reward this support by creating a stronger Air
Canada.
Calin Rovinescu
President and Chief Executive Officer