Air Canada 2010 Annual Report Download - page 27
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2010 Management’s Discussion and Analysis
27
Operating expense increases were partly offset by several factors, including the impact of a stronger Canadian dollar on
foreign currency denominated expenses which reduced operating expenses by approximately $439 million from the same
period in 2009, notable reductions in capacity purchase fees paid to Jazz and aircraft maintenance expenses, as well as the
favourable impact of CTP initiatives.
Unit cost in 2010, as measured by operating expense per available seat mile (CASM), decreased 3.1% over 2009. Excluding
fuel expense, CASM decreased 4.5% year-over-year.
The favourable impact of a stronger Canadian dollar on foreign currency denominated operating expenses (mainly U.S.
dollars), the capacity growth, which results in the airline’s fixed costs being allocated over a greater number of ASMs, the
impact of CTP initiatives, as well as increases in aircraft utilization and average stage length from 2009 were all contributing
factors to the year-over-year CASM decrease.
The following table compares Air Canada’s operating expenses per ASM for 2010 to Air Canada’s operating expenses per
ASM for the corresponding period in 2009.
Full Year Change
(cents per ASM) 2010 2009 cents %
Wages and salaries 2.39 2.51 (0.12) (4.8)
Benefits 0.57 0.44 0.13 29.5
Ownership (DAR) (1) 1.61 1.68 (0.07) (4.2)
Airport user fees 1.51 1.64 (0.13) (7.9)
Capacity purchase with Jazz 1.47 1.64 (0.17) (10.4)
Aircraft maintenance 1.07 1.28 (0.21) (16.4)
Food, beverages and supplies 0.44 0.49 (0.05) (10.2)
Communications and information technology 0.50 0.49 0.01 2.0
Commissions 0.41 0.31 0.10 32.3
Other 2.27 2.34 (0.07) (3.0)
Operating expense, excluding fuel expense (2) 12.24 12.82 (0.58) (4.5)
Aircraft fuel 4.18 4.12 0.06 1.5
Total operating expense 16.42 16.94 (0.52) (3.1)
(1) DAR refers to the combination of depreciation and amortization and aircraft rent expenses.
(2) Refer to section 20 “Non-GAAP Financial Measures” of this MD&A for additional information.
Fuel expense increased 8% from 2009
Fuel expense amounted to $2,652 million in 2010, an increase of $204 million or 8% from 2009. Factors contributing to
the year-over-year change in fuel expense included:
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The above-noted increases were partially offset by the following:
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