Air Canada 2010 Annual Report Download - page 21

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2010 Management’s Discussion and Analysis
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Food, beverages and supplies expense decreased 22% from the fourth quarter of 2009
In the fourth quarter of 2010, food, beverages and supplies expense of $54 million decreased $15 million or 22% from the
fourth quarter of 2009. The impact of an 8.0% growth in passenger traffic growth was more than offset by a favourable
adjustment of $7 million related to previous quarters in 2010, the impact of cost reduction initiatives, as well as the impact
of a stronger Canadian dollar versus the U.S. dollar which reduced food, beverages and supplies expense in the fourth
quarter of 2010 when compared to the same quarter in 2009.
Communications and information technology expense increased 27% from the fourth quarter of 2009
In the fourth quarter of 2010, communications and information technology expense of $81 million increased $17 million
or 27% from the fourth quarter of 2009. The increase in these costs was the result of a higher volume of transactions, an
increase in information technology project spend, as well as rate increases relating to distribution services.
Commission expense increased 41% from the fourth quarter of 2009
On passenger and cargo revenue growth of 13%, commission expense increased $19 million from the same quarter in
2009. This increase was largely driven by Air Canada’s international expansion strategy as a higher proportion of sales to
international destinations are made through travel agencies which increased Air Canada’s cost of sale. A higher proportion
of premium cabin revenue, which typically generates a higher commission rate, was also a contributing factor to the year-
over-year increase.
Other operating expenses increased 4% from the fourth quarter of 2009
Other operating expenses amounted to $339 million in the fourth quarter of 2010, an increase of $13 million or 4%
from the fourth quarter of 2009. The increase in other operating expenses included the impact of the capacity growth,
an increase in credit card fees, resulting from higher passenger volumes, and an increase in expenses related to a greater
volume of ground packages at Air Canada Vacations. Other operating expense increases were partly offset by the favourable
impact of CTP initiatives.
The above-noted decreases were partially offset by the following:
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Aircraft maintenance expense decreased 14% from the fourth quarter of 2009
In the fourth quarter of 2010, aircraft maintenance expense of $173 million decreased $29 million or 14% from the fourth
quarter of 2009. Factors contributing to the year-over-year change in fourth quarter aircraft maintenance expense included:
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Airbus A320 aircraft.
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on Airbus A320 aircraft. Air Canada expects to complete this airframe maintenance activity in the next 12 months.
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mainly engine and component maintenance, which accounted for a decrease of $5 million to aircraft maintenance
expense compared to the fourth quarter of 2009.
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