Air Canada 2008 Annual Report Download - page 23

Download and view the complete annual report

Please find page 23 of the 2008 Air Canada annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 152

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152

2008 Management’s Discussion and Analysis
23
Aircraft maintenance expense decreased 9% from the fourth quarter of 2007
In the fourth quarter of 2008, aircraft maintenance expense of $157 million decreased $16 million or 9% from the fourth
quarter of 2007. Factors contributing to the year-over-year change in fourth quarter aircraft maintenance expense included:
• A decrease of $10 million due to timing of engine maintenance activities relating to theAirbusA320 aircraft
compared to the fourth quarter of 2007.
• Adecreaseof$7millionincomponentmaintenanceexpensesduetoanoverallreductioninmaintenanceeventsin
part due to reduced flying.
• Inthefourthquarterof2007,AirCanadarecordedexpensesrelatedtothepreparationforsaleandsubleasingof
aircraft of $6 million. There were no expenses of this nature in the fourth quarter of 2008.
• Inthefourthquarterof2007,AirCanadarecordedprovisionsrelatingtoshort-termleaseswhichwereextendedin
2008. As a result of these lease extensions, certain provisions, amounting to $4 million, were reversed in the fourth
quarter of 2008.
• Adecreaseof$8millionrelatingtoareductioninthirdpartysupplychainmanagementfeesasaresultofthe
insourcing of these activities. This decrease was partly offset by growth in FTE employees, resulting in an increase to
wages and salaries.
• Otherfactorsaccountingforanetdecreaseof$18million,largelytheresultofrevisedestimatesrelatingtoprior
periods for airframe and engine maintenance events.
The above-noted decreases were partially offset by the following:
• TheimpactofaweakerCanadiandollarversustheUSdollarwhichaccountedforanincreaseof$20millionto
aircraft maintenance expense compared to the fourth quarter of 2007.
• Anincreaseof$9millioninmaintenanceexpensesrelatingtoBoeing777aircraft,EmbraerERJ-190aircraftand
Embraer ERJ-175 aircraft compared to the fourth quarter of 2007. Air Canada had 16 Boeing 777 aircraft in its
operating fleet as at December 31, 2008 versus only eight Boeing 777 aircraft as at December 31, 2007. In addition,
Embraer aircraft are entering a cycle where additional maintenance is required.
• Anincreaseof$8millioninairframemaintenanceexpensesfortheAirbusA320andA321aircraftduetotimingof
maintenance activities versus the fourth quarter of 2007.
Other operating expenses increased $1 million from the fourth quarter of 2007
Other operating expenses amounted to $348 million in the fourth quarter of 2008, an increase of $1 million from the
fourth quarter of 2007. Factors contributing to the year-over-year change in fourth quarter other expenses included:
• TheincreaseinexpensesforgroundpackagesatAirCanadaVacationswasmainlyduehigherpassengervolumes
compared to the the fourth quarter of 2007 and the impact of a weakening Canadian dollar versus the US dollar
which accounted for an increase of $6 million to Air Canada’s land costs compared to the same period in 2007.
• Theincreaseinterminalhandlingcostswasinlargepartduetonewly-imposedairportchargesandrateincreases
at various Air Canada international stations. These increases were partly offset by the impact of reduced flying
compared to the fourth quarter of 2007.
• The decreases in other expenses included employee injury compensation, aircraft engine rental, advertising and
promotion, and cargo trucking expenses.
The following table provides a breakdown of the significant items included in other expenses:
(Canadian dollars in millions)
Fourth Quarter Change
2008 2007 $ %
Other expenses
Air Canada Vacations’ land costs $ 49 $ 34 $ 15 44
Terminal handling 45 37 8 22
Credit card fees 44 45 (1) (2)
Building rent and maintenance 35 33 2 6
Crew expenses (meals, transportation and hotels) 30 27 3 11
Miscellaneous fees and services 30 30 - -
Remaining other expenses 115 141 (26) (18)
$ 348 $ 347 $ 1 -