Air Canada 2010 Annual Report Download - page 7

2010 Management’s Discussion and Analysis
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3. ABOUT AIR CANADA
Air Canada is Canada’s largest domestic, U.S. transborder and international airline and the largest provider of scheduled passenger
services in the Canadian market, the Canada-U.S. transborder market and in the international market to and from Canada.
In 2010, Air Canada, together with Jazz Aviation LP (“Jazz”) (the successor to Jazz Air LP) and other regional airlines operating
flights on behalf of and under commercial agreements with Air Canada, operated, on average, 1,470 daily departures to
59 destinations in Canada, 59 destinations in the U.S. and 60 destinations in the Canada-Europe, Canada-Pacific, Canada-
Caribbean/Central America and Canada-South America markets. Domestic, U.S. transborder and international departures
accounted for approximately 66%, 27% and 7%, respectively, of the approximately 1,470 average daily departures. In
addition, Air Canada provides certain passenger charter services under the brand name “AC Jetz”. In 2010, Air Canada carried
over 32 million passengers and provided passenger service to 178 direct destinations on five continents.
As at December 31, 2010, Air Canada operated a mainline fleet of 205 aircraft comprised of 89 Airbus narrow-body aircraft,
56 Boeing and Airbus wide-body aircraft and 60 Embraer regional jets. In addition, under Air Canada’s capacity purchase
agreement with Jazz (the “Jazz CPA”), Jazz operated, for Air Canada, 123 aircraft comprised of 63 Bombardier regional jets
and 60 Dash-8 aircraft.
Air Canada enhances its network through the Jazz CPA, pursuant to which Air Canada purchases the greater part of Jazz’s
fleet capacity based on predetermined rates and Air Canada determines the routes and schedule which Jazz operates on Air
Canada’s behalf. Under the Jazz CPA, Jazz operates with smaller jet and turboprop aircraft that have lower trip costs than
conventional large jet aircraft, allowing Jazz to provide service to Air Canada’s customers in lower density markets as well
as in higher density markets at off-peak times throughout Canada and the United States.
Air Canada is a founding member of the Star Alliance® network. The Star Alliance® network includes 27 member airlines.
Through its membership in the Star Alliance® network, Air Canada is able to offer its customers access to approximately
1,160 destinations in 181 countries, as well as reciprocal participation in frequent flyer programs and use of airport lounges.
In October 2010, Air Canada announced that it had concluded a memorandum of understanding with United Airlines, Inc.
setting out the principles for a comprehensive revenue-sharing joint venture on U.S. transborder flights. The joint venture
is expected to come into effect in 2011, subject to the parties obtaining regulatory approvals, making the necessary filings,
and finalizing the arrangements and documentation.
In December 2010, Air Canada finalized a transatlantic joint venture with United Air Lines, Inc., Continental Airlines, Inc.
(United Air Lines, Inc. and Continental Airlines, Inc. are collectively “United Airlines”) and Deutsche Lufthansa AG through
which the carriers provide customers with more choice and streamlined service on routings between North and Central
America, and Africa, India, Europe and the Middle East. This transatlantic joint venture, including its revenue share structure,
was implemented effective January 1, 2010.
Through its long-term relationship with Aeroplan Canada Inc. (“Aeroplan”), Air Canada’s frequent flyer program provider,
Air Canada is able to build customer loyalty by offering those customers who are Aeroplan® members the opportunity to
earn Aeroplan® Miles when they fly with Air Canada. Aeroplan is also Air Canada’s single largest customer. The relationship
with Aeroplan is designed to provide a long-term stable and recurring source of revenue from the purchase by Aeroplan of
Air Canada seats to be provided to Aeroplan® members who choose to redeem their Aeroplan® Miles for air travel rewards.
Air Canada also generates revenue from Air Canada Cargo and from tour operator services provided by its wholly-owned
subsidiary, Touram Limited Partnership (doing business as “Air Canada Vacations”).
Air Canada Cargo provides direct cargo services to over 150 Canadian, U.S. transborder and international destinations and
has sales representation in over 50 countries. Air Canada Cargo is Canada’s largest provider of air cargo services as measured
by cargo capacity. Air cargo services are provided on domestic and U.S. transborder flights and on international flights on
routes between Canada and major markets in Europe, Asia, South America and Australia.
Air Canada Vacations is one of Canada’s leading tour operators. Based in Montreal and Toronto, Air Canada Vacations
operates its business in the outbound leisure travel market (Caribbean, Mexico, U.S., Europe, Central and South America,
South Pacific and Asia) by developing, marketing and distributing vacation travel packages. Air Canada Vacations also offers
cruise packages in North America, Europe and the Caribbean.