Air Canada 2012 Annual Report Download - page 78

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2012 Air Canada Annual Report
78
20. NON-GAAP FINANCIAL MEASURES
EBITDAR
EBITDAR (earnings before interest, taxes, depreciation, amortization and impairment, and aircraft rent) is a non-GAAP
financial measure commonly used in the airline industry to view operating results before depreciation, amortization and
impairment, and aircraft rent as these costs can vary significantly among airlines due to differences in the way airlines finance
their aircraft and other assets. EBITDAR is not a recognized measure for financial statement presentation under GAAP, does
not have a standardized meaning, and may not be comparable to similar measures presented by other public companies.
EBITDAR, excluding the impact of benefit plan amendments, and EBITDAR are reconciled to operating income (loss) as follows:
Fourth Quarter Full Year
(Canadian dollars in millions) 2012 2011 Change $ 2012 2011 Change $
GAAP operating income (loss) $ 46 $(98) $144 $437 $179 $ 258
Add back:
Aircraft rent 81 86 (5) 336 335 1
Depreciation, amortization and impairment 157 174 (17) 678 728 (50)
EBITDAR $ 284 $162 $122 $1,451 $1,242 $ 209
Add back:
Benefit plan amendments – – – (124) – (124)
EBITDAR, excluding the impact of benefit
plan amendments $ 284 $162 $122 $1,327 $1,242 $ 85
Adjusted CASM
Air Canada uses adjusted CASM to assess the operating performance of its ongoing airline business without the effects of fuel
expense, the cost of ground packages at Air Canada Vacations and unusual items as such expenses may distort the analysis of
certain business trends and render comparative analysis to other airlines less meaningful.
Fuel expense is excluded from operating expense results as it fluctuates widely depending on many factors, including
international market conditions, geopolitical events, jet fuel refining costs and Canada/U.S. currency exchange rates. Air
Canada also incurs expenses related to ground packages at Air Canada Vacations, which some airlines without comparable
tour operator businesses may not incur. In addition, these costs do not generate ASMs and therefore excluding these costs
from operating expense results, provides for a more meaningful comparison across periods when such costs may vary.
Additionally, in the third quarter of 2012, Air Canada recorded an operating expense reduction of $124 million related to
changes to the terms of the ACPA collective agreement pertaining to retirement age (referred to as benefit plan amendments).
Such adjustment is not expected to occur frequently and is not part of ongoing operating expenses.
Therefore, excluding fuel expense, the cost of ground packages at Air Canada Vacations, and the impact of benefit plan
amendments from operating expenses generally allows for more meaningful comparisons of Air Canada’s operating expense
performance to those of other airlines. Adjusted CASM is not a recognized measure for financial statement presentation under
GAAP, does not have a standardized meaning and may not be comparable to similar measures presented by other public
companies.