Air Canada 2012 Annual Report Download - page 7

2012 Management’s Discussion and Analysis
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3. ABOUT AIR CANADA
Air Canada is Canada’s largest domestic, U.S. transborder and international airline and the largest provider of scheduled
passenger services in the Canadian market, the Canada-U.S. transborder market and in the international market to and from
Canada. In 2012, Air Canada, together with Jazz and other regional airlines operating flights on behalf of Air Canada under
capacity purchase agreements, operated, on average, 1,520 daily scheduled flights to 59 destinations in Canada, 55
destinations in the U.S. and a total of 64 destinations in the Canada-Europe, Canada-Pacific, Canada-Caribbean/Central
America and Canada-South America markets. Domestic, U.S. transborder and international departures accounted for
approximately 66%, 26% and 8%, respectively, of the 1,520 average daily departures. In 2012, Air Canada carried close to
35 million revenue passengers and provided passenger service to 178 direct destinations on five continents.
Air Canada enhances its domestic and transborder network through capacity purchase agreements, including the Jazz CPA and
other capacity purchase agreements with regional airlines operating flights under the Air Canada Express brand name. Under
the Jazz CPA, Air Canada purchases the greater part of Jazz’s fleet capacity based on predetermined rates and Air Canada
determines the routes and schedule which Jazz operates on Air Canada’s behalf. Under the Jazz CPA, Jazz operates with
smaller jet and turboprop aircraft that have lower trip costs than conventional large jet aircraft, allowing Jazz to provide
service to Air Canada’s customers in lower density markets as well as in higher density markets at off-peak times throughout
Canada and the United States.
As at December 31, 2012, Air Canada operated a mainline fleet of 205 aircraft comprised of 89 Airbus narrowbody aircraft, 56
Boeing and Airbus widebody aircraft and 60 Embraer regional jets. In addition, as at December 31, 2012, Jazz operated, on
behalf of Air Canada, 124 aircraft comprised of 49 Bombardier regional jets and 75 Dash-8 turboprop aircraft, and other
regional airlines operating flights on behalf of Air Canada operated an additional 22 aircraft.
In late 2012, Air Canada unveiled plans for a new leisure travel group, which comprises the activities of the airline’s tour
operator business, Air Canada Vacations, and a new low-cost leisure airline which will operate under the brand name Air
Canada rougeTM. Air Canada rougeTM, which will begin flight operations in July 2013, will leverage the strengths of Air Canada’s
extensive network, operational expertise and frequent flyer reward program and will allow the airline to compete more
effectively in the leisure market, with a goal of improving Air Canada’s earnings capabilities and strengthening its competitive
position. Air Canada Vacations is a leading Canadian tour operator. Based in Montreal and Toronto, Air Canada Vacations
operates its business in the outbound leisure travel market (Caribbean, Mexico, U.S., Europe, Central and South America, South
Pacific and Asia) by developing, marketing and distributing vacation travel packages. Air Canada Vacations also offers cruise
packages in North America, Europe and the Caribbean.
Air Canada is a founding member of the Star Alliance™ network. Through Star Alliance™ network’s 27 member airlines, Air
Canada is able to offer its customers access to approximately 1,329 destinations in 194 countries, as well as reciprocal
participation in frequent flyer programs and use of airport lounges and other common airport facilities.
Air Canada participates in a transatlantic joint venture with United Airlines and Deutsche Lufthansa AG through which the
carriers provide customers with more choice and streamlined service on routings between North and Central America, and
Africa, India, Europe and the Middle East. This transatlantic joint venture, including its revenue share structure, was
implemented effective January 1, 2010. Air Canada, together with United Airlines, also has the ability to create a transborder
joint venture.
Through its long-term relationship with Aimia Canada Inc. (formerly Aeroplan Canada Inc. and referred to as “Aeroplan” in this
MD&A), Air Canada’s loyalty program provider, Air Canada is able to build customer loyalty by offering those customers who
are Aeroplan® members the opportunity to earn Aeroplan® Miles when they fly with Air Canada and with the 27 Star
AllianceTM member airlines. Aeroplan is also Air Canada’s single largest customer. The relationship with Aeroplan is designed to
provide a stable and recurring source of revenue from the purchase of Air Canada seats by Aeroplan, which in turn are
provided to Aeroplan® members who choose to redeem their Aeroplan® Miles for travel on Air Canada. Additionally,
Aeroplan® members may also choose to redeem their Aeroplan® Miles for travel with the Star AllianceTM member airlines.
Air Canada also generates revenue from its Air Canada Cargo division. Air Canada Cargo provides direct cargo services to over
150 Canadian, U.S. transborder and international destinations and has sales representation in over 50 countries. Air Canada
Cargo is Canada’s largest provider of air cargo services as measured by cargo capacity. Air cargo services are provided on
domestic and U.S. transborder flights and on international flights on routes between Canada and major markets in Europe,
Asia, South America and Australia.