Air Canada 2008 Annual Report Download - page 29

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2008 Management’s Discussion and Analysis
29
Cargo revenues decreased 6% from 2007
2008 cargo revenues amounted to $515 million, $35 million or 6% below 2007. Freighter revenues decreased $58 million as
Air Canada operated one MD-11 freighter aircraft to Europe in the first half of 2008 versus one MD-11 freighter to Europe
for the full year 2007 and one freighter to Asia in the first half of 2007. Non-freighter revenues increased $23 million or
5%, reflecting higher revenues in international markets. System cargo yield per revenue ton mile improved 12%, mainly
reflecting increased fuel surcharges in 2008. The following contributed to the year-over-year change in cargo revenues:
• In2008,systemtrafcdeclined16%from2007largelyasaresultoftheterminationofMD-11freighteroperations.
Traffic on non-freighter aircraft decreased by 5% due to reduced cargo volumes in the domestic and US transborder
markets. The termination of the Canada Post contract in mid-September 2008, reduced capacity in the US
transborder market and weakening demand for air cargo, especially in the fourth quarter of 2008, contributed to the
traffic decrease.
Other revenues were up 11% from 2007
Other revenues of $854 million in 2008 increased $87 million or 11% from 2007. Factors contributing to the year-over-
year change in other revenues included:
• Higheraircraftsubleaserevenuesof$61millionversus2007.
• Anincreaseof$18million in revenuesatAir CanadaVacations,mainly as a resultofhigherpassengervolumes
compared to 2007.
• Otherfactorsamountingtoanetincreaseof$8million.
Excluding fuel expense, CASM increased 1.7% from 2007
Operating expenses were $11,121 million in 2008, an increase of $908 million or 9% from 2007, reflecting a significant fuel
expense increase of $867 million and higher ownership costs of $143 million compared to the same period in 2007. These
increases were partly offset by a reduction in aircraft maintenance expense of $98 million versus 2007.
Including fuel expense, CASM increased 10.2% over 2007. Excluding fuel expense, CASM increased 1.7% over 2007. Higher
unit cost of ownership, reflecting Air Canada’s investment in new aircraft and the aircraft interior refurbishment program,
and the capacity reduction in the last half of 2008 were factors in the year-over-year increase in CASM, excluding fuel
expense. A significant reduction in aircraft maintenance expense, the stronger Canadian dollar versus the US dollar for most
of 2008 and unit cost savings related to the Boeing 777 aircraft partially offset the overall unit cost increase, excluding fuel
expense.
The 1.7% increase in CASM, excluding fuel expense, was in line with the projected CASM, excluding fuel expense, provided
in the Corporation’s news release dated November 7, 2008 in which CASM, excluding fuel expense, was projected to
increase between 1 to 2%, compared to the same period in 2007.