Air Canada 2013 Annual Report Download - page 7

2013 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 2013, Air Canada, together with Jazz and other regional airlines operating flights on behalf of Air Canada under
capacity purchase agreements, operated, on average, 1,498 daily scheduled flights to 181 direct destinations on five
continents, comprised of 60 Canadian cities, 54 destinations in the United States and a total of 67 cities in Europe, the Middle
East, Asia, Australia, the Caribbean, Mexico and South America. Domestic, U.S. transborder and international departures
accounted for approximately 67%, 25% and 8%, respectively, of the 1,498 average daily departures. In 2013, Air Canada
carried 35.8 million passengers.
At December 31, 2013, Air Canada operated a mainline fleet of 183 aircraft comprised of 81 Airbus narrow-body aircraft,
57 Boeing and Airbus wide-body aircraft and 45 EMBRAER 190 regional jets. In 2013, all of Air Canada’s 15 EMBRAER 175
aircraft were transferred from the mainline fleet to Sky Regional Airlines Inc. (“Sky Regional”), a lower cost regional provider.
The Air Canada Leisure Group was created in 2012 with a goal of improving the airline’s earnings capabilities and
strengthening its competitive position. This leisure travel group represents a coordinated strategy which leverages the
strengths of Air Canada, Air Canada rouge, and Air Canada Vacations. Air Canada Vacations is a leading Canadian tour
operator. 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, Australia and Asia) by developing, marketing and
distributing vacation travel packages. Air Canada Vacations also offers cruise packages in North America, Europe and the
Caribbean.
The Air Canada Leisure Group is positioning itself in the highly competitive leisure market, with a strong value proposition and
competitive cost structure, while benefiting from Air Canada’s widely-recognized and respected brand, operational expertise,
extensive global network, strong airport infrastructure and world-class loyalty program. Through Air Canada rouge, Air Canada
expects to improve margins on leisure routes previously operated by the mainline fleet and pursue opportunities in
international leisure markets made viable by Air Canada rouge’s more competitive cost structure.
Air Canada enhances its domestic and transborder network through capacity purchase agreements (“CPAs”) with regional
airlines, namely Jazz, Sky Regional, Air Georgian Limited (“Air Georgian”) and Exploits Valley Air Services Ltd. (“EVAS”), which
operate flights on behalf of Air Canada under the Air Canada Express banner. At December 31, 2013, the Air Canada Express
fleet was comprised of 41 Bombardier regional jets, 86 Dash-8 turboprop aircraft, 15 EMBRAER 175 regional jets and
17 Beech 1900 aircraft.
Air Canada is a founding member of the Star Alliance® network. Through Star Alliance® network’s 28 member airlines,
Air Canada is able to offer its customers access to approximately 1,328 destinations in 195 countries, as well as reciprocal
participation in frequent flyer programs and use of airport lounges and other common airport facilities.
Air Canada participates in a transatlantic joint venture with 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. Air Canada also has the ability to create a transborder joint venture with United
Airlines.
Through its long-term relationship with Aimia Canada Inc. (formerly Aeroplan Canada Inc. and referred to as “Aeroplan” in this
MD&A), Air Canada’s loyalty 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 and with the 27 other Star
Alliance® member airlines. Aeroplan is also Air Canada’s single largest customer. The relationship with Aeroplan is designed to
provide a stable and recurring source of revenue from the purchase of Air Canada seats by Aeroplan, which in turn are
provided to Aeroplan® members who choose to redeem their Aeroplan® Miles for travel on Air Canada. Additionally,
Aeroplan® members may also choose to redeem their Aeroplan® Miles for travel with the Star Alliance® member airlines.
Furthermore, Aeroplan® members who are among Air Canada’s most frequent flyers are recognized and rewarded through
Air Canada Altitude™, a recognition program delivering a range of premium travel privileges and benefits depending on the
status level they have reached.
Air Canada also generates revenue from its Air Canada Cargo division. 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.