Air Canada 2007 Annual Report Download - page 17

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Management’s Discussion and Analysis of Results and Financial Condition
17
Air Canada reported operating income of $72 million in the fourth quarter of 2007 compared to an operating loss of
$5 million in the fourth quarter of 2006, an improvement of $77 million. The fourth quarter of 2007 included a favourable
revenue adjustment of $26 million relating to a change in accounting estimates.
EBITDAR of $274 million in the fourth quarter of 2007 refl ected an increase of $61 million over the fourth quarter of 2006.
In the fi rst quarter of 2006, Air Canada recorded a special charge for labour restructuring of $28 million related to a non-
unionized workforce reduction program. In the fourth quarter of 2006, the estimated cost of this program was revised which
allowed Air Canada to record a favourable adjustment of $8 million to the special charge for labour restructuring.
Excluding the favourable adjustment to the special charge for labour restructuring of $8 million in the fourth quarter of
2006, operating income and EBITDAR improved $85 million and $69 million, respectively.
System passenger revenues increased 6.0% over the fourth quarter of 2006
Passenger revenues increased $125 million or 6.0% to $2,196 million in the fourth quarter of 2007, due to both traffi c and
yield growth. A favourable revenue adjustment of $26 million relating to a change in accounting estimates was recorded in
the fourth quarter of 2007. As this change in estimates pertains to revenues recorded in prior quarters of 2007, passenger
revenue, yield and RASM percentage changes provided in the table below also exclude this favourable adjustment.
The following factors contributed to the year-over-year change in fourth quarter system passenger revenues:
■ Traffi c growth of 2.6% on a capacity increase of 2.6%, resulting in a passenger load factor
unchanged from the fourth quarter of 2006.
■ A system yield improvement of 2.1% (excluding the favourable adjustment of $26 million)
refl ecting higher fares in the Canada and US transborder markets.
■ A RASM increase of 2.1% (excluding the favourable adjustment of $26 million) due to the growth in yield on an
unchanged passenger load factor. RASM is calculated by the multiplication of yield times passenger load factor.
■ The inclusion of certain ancillary passenger fees effective January 1, 2007 which amounted to $19 million in the
fourth quarter of 2007. These ancillary passenger fees were included in other revenues in 2006.
■ The stronger Canadian dollar which had a negative impact on foreign currency denominated revenues.
The impact accounted for a decrease of $37 million to fourth quarter 2007 passenger revenues.
The table below describes year-over-year percentage changes in fourth quarter passenger revenues, capacity, traffi c,
passenger load factor, yield and RASM.
Fourth Quarter 2007
Versus Fourth Quarter 2006
Passenger
Revenue
% Change
Capacity
(ASMs)
% Change
Traffi c
(RPMs)
% Change
Passenger
Load Factor
pp Change
Yield
% Change
RASM
% Change
Canada 8.0 3.0 2.5 (0.4 ) 5.3 4.8
US transborder 5.4 0.1 1.0 0.7 4.3 5.3
Atlantic 0.3 4.4 4.1 (0.2 ) (3.7 ) (4.0 )
Pacifi c (4.2 ) 0.3 (2.0 ) (1.9 ) (2.3 ) (4.5 )
Other 25.3 6.2 11.2 3.5 12.8 18.0
Other(1) 7.9 6.2 11.2 3.5 (2.9 ) 1.6
System 6.0 2.6 2.6 - 3.3 3.3
System(1) 4.8 2.6 2.6 - 2.1 2.1
(1) System and Other passenger revenue, yield and RASM percentage changes exclude a favourable adjustment of $26 million relating to a change in accounting estimates.