Air Canada 2008 Annual Report Download - page 31
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Please find page 31 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.2008 Management’s Discussion and Analysis
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• ThereductionsinunionizedranksannouncedinJuneonlytookeffectinNovember2008.AdditionalFTEemployee
reductions are anticipated in early 2009.
• Averagewagesincreased1.0%over2007.
• In2008,AirCanadarecordedaprovisionof$8millionrelatedtothereductionofemployeesunderthestaffreduction
plan announced on June 17, 2008.
The above-noted increases were largely offset by the following:
• Provisionsrelating to stock-basedcompensation expenseamountedto$15 million in2007. In2008, provisions
relating to stock-based compensation of $5 million were reversed as management had determined that certain
performance vesting criteria would not be met.
• Provisionsrelatingtoemployeeprotsharingprogramsamountedto$43millionin2007versusprovisionsof$29
million in 2008.
• Overtimeexpenseswerereducedby$8millioncomparedto2007.
Employee benefits expense amounted to $349 million in 2008, a decrease of $46 million or 12% from 2007, mainly due
to a reduction in pension expense as a result of revised pension actuarial estimates made as of January 1, 2008. Refer to
section 9.6 of this MD&A for information on Air Canada’s pension obligations.
Airport and navigation fees decreased 2% from 2007
Airport and navigation fees of $1,001 million decreased $21 million or 2% from 2007. Factors contributing to the year-
over-year change in airport and navigation fees included:
• Lowerratesforlandingandgeneralterminalfees.LandingfeesatTorontoPearsonAirportwerereducedby3.1%and
terminal charges were reduced by 4.7% effective January 1, 2008.
• NavigationfeesinCanadawerereducedby4%effectiveAugust2007.
Capacity purchase costs with Jazz increased 3% from 2007
Capacity purchase costs with Jazz, pursuant to the Jazz CPA, amounted to $948 million in 2008 compared to $923 million in
2007, an increase of $25 million or 3%, mainly due to a predetermined contractual increase in Jazz CPA rates of $20 million
and other costs amounting to $12 million. Partly offsetting these increases was the favourable impact of foreign exchange
on US denominated Jazz CPA expenses, accounting for a decrease of $7 million compared to 2007. Jazz ASM capacity was
reduced by 1.6% in 2008 compared to 2007.
Ownership costs increased 17% from 2007
Ownership costs, comprised of aircraft rent, depreciation and amortization expenses, of $973 million in 2008 increased
$143 million or 17% from 2007. Factors contributing to the year-over-year change in ownership costs included:
• TheadditionofnewaircrafttoAirCanada’soperatingeetwhichaccountedforanincreaseof$97million.
• Anincreaseindepreciationexpensesof$68millionrelatedtoAirCanada’saircraftinteriorrefurbishmentprogram.
• Anincreaseindepreciationexpenseforenginesandrotablesparepartsof$20millionover2007.Afavourable
adjustment of $9 million relating to rotable spare parts was recorded in 2007 versus a favourable adjustment of $2
million in 2008.
• Anincreaseof$6millioninsoftwareamortizationcostscomparedto2007.
• Anincreaseof$6millionasaresultofaircraftleaseratechangescomparedto2007.
• Otherfactorsaccountingforanetincreaseof$8million.
The above-noted increases were partially offset by the following:
• TheremovalofaircraftfromAirCanada’seetwhichaccountedforadecreaseof$36millioninaircraftrentand
depreciation and amortization expenses.
• Adecreaseof$23milliontoaircraftrentexpenseasaresultofreducedMD-11freighterying.
• TheimpactofastrongerCanadiandollarversustheUSdollarwhichaccountedforadecreaseof$3milliontoaircraft
rent expense compared to 2007.