Air Canada 2014 Annual Report Download - page 29

Download and view the complete annual report

Please find page 29 of the 2014 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 140

  • 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

29
2014 Management’s Discussion and Analysis
FUEL EXPENSE INCREASED 6% FROM 2013
In 2014, fuel expense of $3,747 million increased $213 million or 6% from 2013. The increase in fuel expense
year-over-year was due to the unfavourable impact of a weaker Canadian dollar versus the U.S. dollar when
compared to 2013, which accounted for an increase of $221 million or 7%, and a higher volume of fuel litres
consumed, which accounted for an increase of $192 million. These increases were partly offset by the impact
of a 6% year-over-year decline in jet fuel prices, which accounted for a decrease of $200 million to fuel expense
in 2014.
The table below provides Air Canada’s fuel cost per litre and economic fuel cost per litre for the periods indicated.
CANADIAN DOLLARS IN MILLIONS, EXCEPT WHERE INDICATED
FULL YEAR CHANGE
2014 2013 $ %
AIRCRAFT FUEL EXPENSE – GAAP $ 3,747 $ 3,534 $ 213 6
Add: Net cash payments on fuel derivatives (1) 16 21 (5) (24)
Economic cost of fuel – Non-GAAP (2) $ 3,763 $ 3,555 $ 208 6
FUEL CONSUMPTION (THOUSANDS OF LITRES) 4,213,214 3,992,617 220,597 5.5
FUEL COST PER LITRE (CENTS) – GAAP 88.9 88.5 0.4 0.5
ECONOMIC FUEL COST PER LITRE (CENTS) – NON-GAAP (2) 89.3 89.0 0.3 0.3
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 $2,282 MILLION IN 2014,
AN INCREASE OF $35 MILLION OR 2% FROM 2013
In 2014, wages and salaries expense of $1,786 million increased $82 million or 5% from 2013, mainly due to higher
average salaries, Air Canada having recorded one-time payments totaling $30 million related to its collective
agreement with ACPA in 2014 while no such payments were recorded in 2013, and an increase in expense accruals
related to the annual employee profit sharing programs. These increases were partly offset by the favourable
impact of Air Canada having outsourced its London ground handling operations to a third party provider in 2014.
In 2014, employee benefits expense of $496 million decreased $47 million or 9% from 2013, reflecting a
reduction in foreign pension plan liabilities and the impact of higher discount rates which decreased the current
service cost of defined benefit pension plans. These decreases were partly offset by an increase in Air Canada’s
match of employee contributions in the Employee Share Ownership Plan.
CAPACITY PURCHASE COSTS INCREASED 5% FROM 2013
In 2014, capacity purchase costs of $1,182 million increased $59 million or 5% from 2013, mainly due to an
increase in block hours flown by Sky Regional and, to a lesser extent, other third party carriers (excluding
Jazz) operating under capacity purchase agreements with Air Canada, higher rates under 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.