Air Canada 2007 Annual Report Download - page 22

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2007 Air Canada Annual Report
22
Aircraft maintenance materials and supplies decreased 16% from the fourth quarter of 2006
Aircraft maintenance, materials and supplies of $173 million in the fourth quarter of 2007 decreased $32 million or 16%
from the fourth quarter of 2006. Factors contributing to the year-over-year fourth quarter change in aircraft maintenance,
materials and supplies expense included:
■ The impact of a stronger Canadian dollar versus the US dollar
which accounted for a decrease of $11 million in 2007.
■ A $25 million reduction in airframe and engine maintenance expenses for the Boeing 767 aircraft
due to the timing of maintenance events versus the same period in 2006.
■ Reduced airframe and engine maintenance expenses of $10 million due to the lease and sublease
of four Airbus A340 aircraft to third parties.
■ A $9 million one-time charge in 2006 relating to a new component maintenance agreement with ACTS.
The above decreases were partly offset by the following:
■ An increase in expense of $5 million related to the preparation of aircraft for sublease.
■ An increase of $11 million relating to the narrow-body fl eet, including the Embraer aircraft,
and the Airbus A330 aircraft due to timing of maintenance activities versus the fourth quarter of 2006.
■ Higher deicing expenses of $10 million over 2006 due to more severe weather conditions in 2007
versus the same period in 2006.
Food, beverages and supplies decreased 12% from the fourth quarter of 2006
Food, beverages and supplies of $67 million in the fourth quarter of 2007 decreased $9 million or 12% from the fourth
quarter of 2006 despite a passenger traffi c growth of 2.6%. Factors contributing to the year-over-year fourth quarter
decrease in food, beverages and supplies expense included cost savings initiatives implemented by Air Canada in 2007.
Commission expense decreased 24% from the fourth quarter of 2006
Despite a combined passenger and cargo revenue growth of 5% over the fourth quarter of 2006, commission expense
of $37 million in the fourth quarter of 2007 decreased $12 million or 24% from the fourth quarter of 2006. Factors
contributing to the year-over-year fourth quarter change in commission expense included:
■ The favourable impact of a new commission structure at Air Canada Vacations in 2007.
■ Commercial initiatives implemented by Air Canada to lower commission costs.
■ An increase in web penetration which lowers distribution costs.
Web penetration in Canada reached 64% in the fourth quarter of 2007, a 7 percentage point increase from the fourth
quarter of 2006. Web penetration for combined domestic Canada and US transborder passenger sales was 55%,
a 9 percentage point increase over the previous year’s quarter. System-wide web penetration of 34% represented an
increase of 6 percentage points from the fourth quarter of 2006. These fi gures do not include sales from Air Canada call
centres that employ the Air Canada host platform. Including sales from call centres, Air Canada’s direct penetration for
Canada was 72% for the fourth quarter of 2007 versus 69% for the fourth quarter of 2006.