Air Canada 2013 Annual Report Download - page 26

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2013 Air Canada Annual Report
26
The table below provides Air Canada’s fuel cost per litre and economic fuel cost per litre for the periods indicated.
Full Year Change
(Canadian dollars in millions, except where indicated) 2013 2012 $ %
Aircraft fuel expense – GAAP $3,534 $3,561 $ (27) (1)
Add: Net cash payments on fuel derivatives(1) 21
40 (19) (48)
Economic cost of fuel – Non-GAAP(2) $ 3,555 $3,601 $ (46) (1)
Fuel consumption (thousands of litres) 3,992,617 4,020,988 (28,371) (0.7)
Fuel cost per litre (cents) – GAAP 88.5 88.6 (0.1) –
Economic fuel cost per litre (cents) – Non-GAAP(2) 89.0 89.6 (0.6) (0.6)
(1) Includes net cash settlements on maturing fuel derivatives and premium costs associated with those derivatives.
(2) The economic cost of fuel is not a recognized measure for financial statement presentation under GAAP, does not have a standardized meaning, and may not be
comparable to similar measures presented by other public companies. Air Canada uses this measure to calculate its cash cost of fuel. It includes the actual net cash
settlements from maturing fuel derivative contracts during the period and premium costs associated with those derivatives.
Wages, salaries and benefits expense amounted to $2,247 million in 2013, an increase of $137 million or 6% from
2012
In 2013, wages and salaries expense of $1,704 million increased $80 million or 5% from 2012. The increase in wages and
salaries year-over-year was mainly due to an increase of 2.0% in the average number of full-time equivalent (FTE) employees,
higher average salaries and an increase in expense accruals related to the annual employee profit sharing programs. The
growth in employment levels was mainly due to the increase in capacity and to a higher proportion of wide-body flying year-
over-year.
In 2013, employee benefits expense of $543 million increased $57 million or 12% from 2012, mainly due to the impact of
lower discount rates which increase the service cost of pension and other employee benefits.
Capacity purchase costs increased 5% from 2012
In 2013, capacity purchase costs of $1,123 million increased $51 million or 5% from 2012, mainly due to an increase in block
hours flown by Sky Regional under its capacity purchase agreement with Air Canada, higher rates under Air Canada’s capacity
purchase agreement with Jazz (the “Jazz CPA”) and an unfavourable currency impact. These increases were partly offset by a
decline in block hours flown by Jazz under the Jazz CPA.
Airport and navigation fees decreased 1% from 2012
In 2013, airport and navigation fees of $983 million decreased $9 million or 1% from 2012, despite increased volume, mainly
due to lower airport user fee rates versus 2012.
Aircraft maintenance expense decreased 6% from 2012
In 2013, aircraft maintenance expense of $632 million decreased $40 million or 6% from 2012. The decrease in aircraft
maintenance expense was largely due to a lower volume of engine maintenance events. Partly offsetting this decrease were
an increase in deicing activity and an unfavourable currency impact.
Sales and distribution costs increased 2% from 2012
In 2013, sales and distribution costs of $613 million increased $10 million or 2% from 2012 on passenger revenue growth of
2.6%. A decrease in commission expense was more than offset by an increase in credit card expenses, which was in line with
sales and revenue growth, higher transaction fees paid to global distribution service providers which was largely due to a
higher volume of transactions, as well as an unfavourable currency impact.