Air Canada 2013 Annual Report Download - page 79

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2013 Management’s Discussion and Analysis
79
Adjusted CASM
Air Canada uses Adjusted CASM to assess the operating performance of its ongoing airline business without the effects of fuel
expense, the cost of ground packages at Air Canada Vacations and unusual items, such as benefit plan amendments and
impairment charges, as these items may distort the analysis of certain business trends and render comparative analysis to
other airlines less meaningful.
Fuel expense is excluded from operating expense results as it fluctuates widely depending on many factors, including
international market conditions, geopolitical events, jet fuel refining costs and Canada/U.S. currency exchange rates.
Air Canada also incurs expenses related to ground packages at Air Canada Vacations which some airlines, without comparable
tour operator businesses, may not incur. In addition, these costs do not generate ASMs and therefore excluding these costs
from operating expense results provides for a more meaningful comparison across periods when such costs may vary.
Therefore, excluding fuel expense, the cost of ground packages at Air Canada Vacations and unusual items from operating
expenses generally allows for more meaningful analysis of Air Canada’s operating expense performance and a more
meaningful comparison to those of other airlines.
Adjusted CASM 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.
Adjusted CASM is reconciled to GAAP operating expense as follows:
(Canadian dollars in millions, except where
indicated)
Fourth Quarter Full Year
2013 2012 $ Change 2013 2012 $ Change
GAAP operating expense $2,759 $2,792 $(33) $11,763 $ 11,672 $91
Adjusted for:
Aircraft fuel (831) (821) (10) (3,534) (3,561) 27
Cost of ground packages at Air Canada
Vacations (66) (57) (9) (327) (319) (8)
Benefit plan amendments(1) 82 – 82 82 127 (45)
Impairment charge(2) (6) – (6) (30) – (30)
Operating expense, adjusted for the above-
noted items $1,938 $1,914 $24 $7,954 $ 7,919 $35
ASMs (millions) 16,033 15,484 3.5% 68,573 67,269 1.9%
Adjusted CASM (cents) ¢12.09 ¢12.37 (2.3)% ¢11.60 ¢ 11.78 (1.5)%
(1) In the fourth quarter of 2013, Air Canada recorded an operating expense reduction of $82 million related to amendments to defined benefit pension plans. In the third
quarter of 2012, Air Canada recorded an operating expense reduction of $127 million related to changes to the terms of the ACPA collective agreement pertaining to
retirement age.
(2) In 2013, Air Canada recorded an impairment charge of $30 million, of which $24 million related to Airbus A340-300 aircraft.