Air Canada 2011 Annual Report Download - page 33

Download and view the complete annual report

Please find page 33 of the 2011 Air Canada annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 150

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150

2011 Management’s Discussion and Analysis
33
Factors contributing to the year-over-year change in fourth quarter Other expenses included:
The 2.5% growth in capacity; and
An increase of $8 million or 16% in expenses related to ground packages at Air Canada Vacations which was due to a
higher cost of ground packages and, to a lesser extent, an increase in passenger volumes.
Non-operating income amounted to $38 million in the fourth quarter of 2011 compared to non-operating
income of $28 million in the fourth quarter of 2010
The following table provides a breakdown of non-operating income for the periods indicated:
Fourth Quarter Change
(Canadian dollars in millions) 2011 2010 $
Foreign exchange gain (loss) $114 $ 136 $(22)
Interest income 10 9 1
Interest expense (76) (86) 10
Net financing expense relating to employee benefit liabilities (4) (18) 14
Loss on financial instruments recorded at fair value (5) 8 (13)
Other (1) (21) 20
$ 38 $ 28 $10
Factors contributing to the year-over-year change in fourth quarter non-operating income included:
Gains on foreign exchange (mainly related to U.S. currency denominated long-term debt) which amounted to
$114 million in the fourth quarter of 2011 compared to gains of $136 million in the fourth quarter of 2010. The gains in
the fourth quarter of 2011 were mainly attributable to a stronger Canadian dollar at December 31, 2011 when compared
to September 30, 2011. The December 31, 2011 closing exchange rate was US$1 = C$1.017 while the September 30,
2011 closing exchange rate was US$1 = C$1.0482.
A decrease in interest expense of $10 million in the fourth quarter of 2011 which was largely due to the impact of net
debt repayments made in 2011 and the impact of lower interest rates when compared to the fourth quarter of 2010.
A decrease in net financing expense relating to employee benefit liabilities of $14 million which was due to a decline in
the discount rate used to measure the expense.
Losses related to fair value adjustments on derivative instruments which amounted to $5 million in the fourth quarter of
2011 versus gains of $8 million in the fourth quarter of 2010. Refer to section 12 of this MD&A for additional information.