Air Canada 2011 Annual Report Download - page 32

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2011 Air Canada Annual Report
32
Ownership costs decreased 17% from the fourth quarter of 2010
Ownership costs, which are comprised of depreciation, amortization and impairment, and aircraft rent expenses, of
$260 million in the fourth quarter of 2011 declined $53 million or 17% from the fourth quarter of 2010. This decrease was
due to Air Canada having recorded an impairment charge of $49 million relating to Airbus A340-300 and Boeing 767-200
aircraft in the fourth quarter of 2010 while no such charge was recorded in the fourth quarter of 2011.
Aircraft maintenance expense increased 29% from the fourth quarter of 2010
In the fourth quarter of 2011, aircraft maintenance expense of $212 million increased $48 million or 29% from the fourth
quarter of 2010. In the fourth quarter of 2011, Air Canada recorded an unfavourable adjustment of $20 million to its end of
lease maintenance return provision, resulting from changes in cost and discount rate assumptions. A higher volume of engine
maintenance events, which was largely related to Air Canada’s narrowbody fleet, and an increase in maintenance cost
obligations related to aircraft lease terminations were also contributing factors to the increase.
Sales and distribution costs decreased 4% from the fourth quarter of 2010
In the fourth quarter of 2011, sales and distribution costs of $140 million decreased $6 million or 4% from the fourth quarter
of 2010 on passenger revenue growth of 5.2%. Sales and distribution costs are comprised of commissions and incentives paid
to passenger and cargo distributors, credit card and GDS transaction fees, as well as sales and distribution costs related to Air
Canada Vacations. Factors contributing to the year-over-year change in fourth quarter sales and distribution costs included:
A decrease in GDS transaction fees, which was in part due to higher volume credits accrued in the fourth quarter of 2011
compared to the fourth quarter of 2010, as well as the impact of contract improvements; and
A decrease in interline commissions which was due to contract improvements.
The above-noted decreases were partly offset by the following:
The passenger revenue growth of 5.2%; and
An increase in credit card fees which was due to higher passenger sales and an increase in the percentage of sales made
on credit cards.
Food, beverages and supplies expense decreased 2% from the fourth quarter of 2010
In the fourth quarter of 2011, food, beverages and supplies expense of $53 million decreased $1 million or 2% from the fourth
quarter of 2010. The impact of a 2.6% growth in passenger traffic was more than offset by the favourable impact of CTP
initiatives, most of which are related to contract and process improvements.
Other operating expenses increased 4% from the fourth quarter of 2010
Other operating expenses amounted to $287 million in the fourth quarter of 2011, an increase of $10 million or 4% from the
fourth quarter of 2010.
The following table provides a breakdown of the more significant items included in other expenses:
Fourth Quarter Change
(Canadian dollars in millions) 2011 2010 $ %
Air Canada Vacations' land costs $57 $49 $ 8 16
Terminal handling 43 44 (1) (2)
Building rent and maintenance 29 31 (2) (7)
Crew cycle 30 28 2 6
Miscellaneous fees and services 32 33 (1) (2)
Remaining other expenses 96 92 4 4
$287 $277 $ 10 4