Air Canada 2010 Annual Report Download - page 22

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2010 Air Canada Annual Report
22
Gains on foreign exchange amounted to $111 million in the fourth quarter of 2010
Gains on foreign exchange, which were mainly related to U.S. currency denominated long-term debt, amounted to $111 million
in the fourth quarter of 2010 compared to gains of $108 million in the fourth quarter of 2009. The gains in the fourth quarter
of 2010 were mainly attributable to a stronger Canadian dollar at December 31, 2010, compared to September 30, 2010. The
December 31, 2010 noon day exchange rate was US$1 = C$0.9946 while the September 30, 2010 noon day exchange rate was
US$1 = C$1.0298.
Provision for income taxes of $15 million in the fourth quarter of 2010
Air Canada recorded a provision for income taxes of $15 million on pre-tax income of $149 million in the fourth quarter
of 2010, representing an effective income tax rate of 10%. The effective income tax rate is affected by the reclassification
of losses on fuel derivatives from Accumulated Other Comprehensive Loss (“AOCL”) to income of $31 million, which does
not attract any net tax recovery due to the reversal of valuation allowance from prior years. The effective income tax rate
is also impacted by certain non-taxable items as well as the reversal of valuation allowance on future income tax assets
arising from fresh start reporting on September 30, 2004.
Non-operating expense amounted to $91 million in the fourth quarter of 2010
Non-operating expense amounted to $91 million in the fourth quarter of 2010 compared to non-operating expense of $83
million in the fourth quarter of 2009. Factors contributing to the year-over-year change in fourth quarter non-operating
expense included:
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net impact of higher debt balances in the last twelve months was more than offset by a year-over-year increase in
interest income, mainly the result of higher rates of interest and higher cash balances, coupled with the favourable
impact of a stronger Canadian dollar on U.S. currency denominated interest expense. In addition, in the fourth
quarter of 2009, Air Canada recorded a charge of $8 million in interest expense related to the sale and leaseback of
three Boeing 777 aircraft. There was no such charge recorded in the fourth quarter of 2010.
The following table provides a breakdown of the more significant items included in other expenses.
(Canadian dollars in millions)
Fourth Quarter Change
2010 2009 $%
Credit card fees $ 50 $ 45 $ 5 11
Air Canada Vacations’ land costs 49 47 2 4
Terminal handling 45 45 - -
Miscellaneous fees and services 33 33 - -
Building rent and maintenance 31 35 (4) (11)
Crew cycle 28 29 (1) (3)
Remaining other expenses 103 92 11 12
$ 339 $ 326 $ 13 4
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