Air Canada 2011 Annual Report Download - page 4

2011 Air Canada Annual Report
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MESSAGE FROM THE PRESIDENT AND CHIEF EXECUTIVE OFFICER
espite some enormous challenges, Air Canada made
significant progress in 2011 pursuing strategic
initiatives towards sustainable profitability in an
industry that continues to transform globally. As with any
difficult transition, there will be much complexity to tempt us
to take our eye off the ball but, just as we did in 2011, we will
maintain our focus on our four corporate priorities throughout
2012.
While we endured a dramatic spike in fuel costs and faced
several well-publicized labour disputes, we nonetheless
managed to achieve two key value drivers: the company’s
record $11.6 billion revenue performance and our annualized,
recurring improvements of $530 million from our Cost
Transformation Program (“CTP”), whose initial goal was
$500 million. This combination of revenue improvement and
cost control will remain an important value driver of Air Canada.
One of the significant challenges we faced in 2011 was a
27 per cent or $723 million increase in fuel expense over 2010,
which negatively impacted our results despite a wide range of
mitigation measures. In addition, the global economy to which
our industry is highly correlated also slowed during the year.
For 2011, we reported EBITDAR of approximately $1.2 billion,
a 10 per cent decline from the record EBITDAR (before a net
reduction of $46 million to a provision for cargo investigations)
of the prior year. Our operating income was $179 million
versus $232 million in 2010 (before a net reduction of
$46 million to a provision for cargo investigations). For 2011
we reported a net loss of $249 million, which included
$54 million in foreign exchange losses, compared to a net loss
of $24 million a year earlier, which included $184 million in
foreign exchange gains. Consequently, Air Canada’s stock
suffered in 2011 as did the value of most major carriers
tracked by the NYSE Arca Global Airline Index, which fell
31.5 per cent.
However, looking past the headlines reveals some encouraging
trends as the company performed well on several key
operating metrics. In achieving record revenue for the year, we
saw passenger revenue increase in every market segment and
rise 8.3 per cent system-wide over 2010 on traffic growth of
only 4.5 per cent. Passenger yield improved 3.3 per cent. Cargo
revenue grew 3.3 per cent in a challenging environment where
traffic fell 1.7 per cent. Such results are evidence of our
disciplined approach to capacity management, which is further
confirmed by an annual passenger load factor of
81.6 per cent – only one-tenth of a percentage point below
our company’s record load factor in 2010.
As mentioned, we surpassed our three-year goal of
$500 million in permanent CTP cost savings and revenue
enhancements. The benefits are apparent in the year-over-
year reduction in unit costs of 2.9 per cent (excluding fuel
expense and excluding the cost of ground packages at Air
Canada Vacations) – the second year in a row we have
achieved such unit cost reductions. We ended the year with
cash, cash equivalents and short-term investments of nearly
$2.1 billion. This equates to 18 per cent of 2011 operating
revenue, exceeding our target of 15 per cent of 12-month
trailing operating revenue.
More difficult to quantify but equally valid in measuring our
performance were the numerous awards Air Canada won. The
list is impressive not only for its length and each award’s
significance, but also for its variety. For the second year in a
row the independent research firm SkyTrax named Air Canada
the “Best International Airline in North America” in its 2011
World Airline Awards, based upon a worldwide survey of more
than 18 million travellers. We were voted by the readers of
Business Traveler magazine as offering the “Best In-Flight
Services in North America” and the “Best North American
Airline for International Travel” for the fourth consecutive year
and we were named by the readers of Global Traveler
magazine the “Best Airline in North America” for the third
consecutive year in its annual survey.
In addition, we were also recognized in areas specific to
particular types of travellers and those with special interests.
For example, Air Canada was named “Canada’s Favourite
Airline for Business Travel” in the annual Ipsos Reid Business
Traveller Survey. It was the third consecutive year of
improvement in Air Canada’s ratings in the Ipsos national
survey, with our airline preferred by 71 per cent of Canadian
business travellers. For the fourth consecutive year, Air Canada
received top honors for “Best Flight Experience to Canada” in
Executive Travel magazine’s Leading Edge Awards readers’
2011 survey. We were ranked among the Top Five Airlines for
in-flight entertainment by independentTraveler.com and our
enRoute inflight publication received multiple awards,
including nine National Magazine Awards. Finally, we were
also rated as one of the Top Five Most Attractive Companies
to work for in Canada in a survey by Randstad Canada and
ICMA International.
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