Air Canada 2008 Annual Report Download - page 19

2008 Management’s Discussion and Analysis
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• Inthefourthquarterof2008,capacitywasreducedby7.2%fromthefourthquarterof2007.Capacityreductions
were largely reflected on United Kingdom routes and were mainly achieved through discrete frequency adjustments
and the use of smaller aircraft on existing routes. In addition, service from Toronto – Rome was suspended at the
end of October for the winter season. In the fourth quarter of 2008, capacity on the Canada – Germany service was
increased by 4.8% which reflected Air Canada’s new Ottawa – Frankfurt service and increased frequency on Toronto
– Frankfurt, but this increase was partly offset by reductions on its Calgary – Frankfurt service.
• In the fourth quarter of 2008, trafc decreased 3.7% on a capacity reduction of 7.2% resulting in a passenger
load factor improvement of 2.9 percentage points from the fourth quarter of 2007. Traffic on the United Kingdom
service decreased 3.7% on a capacity reduction of 10.8%, resulting in a passenger load factor improvement of 5.9
percentage points.
• Inthefourthquarterof2008,RASMincreased13.5%fromthefourthquarterof2007duetoboththegrowthin
yield and the passenger load factor improvement.
Pacific passenger revenues increased 5.2% from the fourth quarter of 2007
Pacific passenger revenues of $220 million in the fourth quarter of 2008 increased $11 million or 5.2% from the fourth
quarter of 2007 due to significant yield growth which more than offset a decrease in traffic. Factors contributing to the
year-over-year change in fourth quarter Pacific passenger revenues included:
• Inthefourthquarterof2008,yieldimproved17.4%fromthefourthquarterof2007,reectingyieldgrowthonall
Pacific services. A higher average fare in the economy cabin, as a result of an improvement in fare mix, combined
with increased fuel surcharges, were also factors in the Pacific yield growth over the fourth quarter of 2007. A variety
of initiatives were put in place to retain traffic in the premium cabin which had a negative impact on the premium
cabin yield.
• AweakerCanadiandollarinthefourthquarterof2008,whichincreasestheCanadiandollarvalueofsalesinforeign
countries, had a positive impact on foreign currency denominated revenues, accounting for an increase of $7 million
to fourth quarter 2008 Pacific passenger revenues compared to the fourth quarter of 2007.
• Inthefourthquarterof2008,capacitywasreducedby17.7%fromthefourthquarterof2007.Capacitydecreases
were reflected on all Pacific services and were mainly achieved through the reduction of frequencies on existing
routes. This reduction was led by the cancellation of the Vancouver – Osaka service, the suspension of Toronto-Tokyo
service for the winter season, and by reducing the Vancouver – China routes from daily to three times a week on
Beijing and four times a week on Shanghai. The use of larger aircraft from Vancouver to both Hong Kong and Tokyo
offset some of the capacity reductions.
• Inthefourthquarterof2008,trafcdecreased10.4%onacapacityreductionof17.7%resultinginpassengerload
factor improvement of 7.1 percentage points from the fourth quarter of 2007.
• Inthefourthquarterof2008,RASMincreased27.9%fromthefourthquarterof2007duetoboththegrowthin
yield and the passenger load factor improvement.
Other passenger revenues increased 1.0% from the fourth quarter of 2007
Other passenger revenues (comprised of South Pacific, Caribbean, Mexico and South America) of $187 million in the
fourth quarter of 2008 increased $2 million or 1% from the fourth quarter of 2007 due to traffic and yield growth. Factors
contributing to the year-over-year change in fourth quarter other passenger revenues included:
• Inthefourthquarterof2008,trafcincreased7.3%onacapacitygrowthof10.2%,resultinginadecreaseof2.0
percentage points in passenger load factor compared to the fourth quarter of 2007. Traffic growth in these markets
mainly reflected the addition of a new non-stop service from Vancouver to Sydney, Australia which is now being
operated with a Boeing 777-200 aircraft. For the majority of the fourth quarter of 2007, this one-stop service via
Hawaii was operated through the use of a Boeing 767-300 aircraft and the Vancouver-Hawaii segment was recorded
in US transborder passenger revenues. Higher capacity to traditional leisure destinations and to South America was
also a factor in the traffic growth versus the same period in 2007. Additionally, effective December 1, 2008, the
service to Sao Paolo was upgauged to a Boeing 777 aircraft from a Boeing 767-300 aircraft, and non-stop service to
Buenos Aires was introduced. In 2007, this service was a one-stop via Santiago.
• Inthefourthquarterof2008,adjustedyieldimproved9.3%(excludesafavourableadjustmentof$26millionin
the fourth quarter of 2007) from the fourth quarter of 2007 largely due to increased fares and fuel surcharges. The
higher yield was achieved in spite of a 7.1% increase in average stage length compared to the same period in 2007.
• AweakerCanadiandollarinthefourthquarterof2008,whichincreasestheCanadiandollarvalueofsalesinforeign
countries, had a positive impact on foreign currency denominated revenues, accounting for an increase of $4 million