Air Canada 2014 Annual Report Download - page 31
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31
2014 Management’s Discussion and Analysis
no such adjustments were recorded in 2013. In addition, one-time start-up expenses related to the transfer of
Embraer 175 aircraft from the mainline fleet to Sky Regional were incurred in 2013 while no such charges were
recorded in 2014.
The following table provides a breakdown of the more significant items included in Other expenses:
CANADIAN DOLLARS IN MILLIONS
FULL YEAR CHANGE
2014 2013 $ %
Terminal handling $ 235 $ 196 $ 39 20
Building rent and maintenance 147 131 16 12
Crew cycle 141 120 21 18
Miscellaneous fees and services 122 128 (6) (5)
Remaining other expenses 424 436 (12) (3)
OTHER OPERATING EXPENSES $ 1,069 $ 1,011 $ 58 6
NON-OPERATING EXPENSE AMOUNTED TO $710 MILLION IN 2014 COMPARED TO
NON-OPERATING EXPENSE OF $617 MILLION IN 2013
The following table provides a breakdown of non-operating expense for the periods indicated:
CANADIAN DOLLARS IN MILLIONS
FULL YEAR CHANGE
2014 2013 $
Foreign exchange loss $ (307) $ (120) $ (187)
Interest income 39 32 7
Interest expense (322) (397) 75
Interest capitalized 30 46 (16)
Net financing expense relating to employee benefits (134) (208) 74
Fuel and other derivatives (1) 37 (38)
Other (15) (7) (8)
TOTAL NON-OPERATING EXPENSE $ (710) $ (617) $ (93)
Factors contributing to the year-over-year change in full year non-operating expense included:
• Losses on foreign exchange which amounted to $307 million in 2014 compared to losses of $120 million
in 2013. These losses were mainly related to unrealized foreign exchange losses on the translation of
U.S. dollar denominated debt. Partly offsetting these foreign exchange losses were revaluation gains related
to foreign currency derivatives of $74 million and favourable foreign currency derivative settlements of
$58 million. The December 31, 2014 closing exchange rate was US$1 = C$1.1601 while the December 30,
2013 closing exchange rate was US$1 = C$1.0636. Refer to section 12 “Financial Instruments and Risk
Management” of this MD&A for additional information.
• In 2013, Air Canada recorded a charge of $95 million in interest expense pertaining to the purchase of
its senior secured notes due in 2015 and 2016, comprised of $61 million related to premium costs paid,
in respect of notes purchased, and $34 million related to the write-off of existing transaction costs and
discounts. No such charge was recorded in 2014.
• A decrease in net financing expense relating to employee benefits of $74 million which was mainly due to
the impact of lower pension liabilities.
• Losses related to fuel and other derivatives which amounted to $1 million in 2014 versus gains of
$37 million in 2013. Refer to section 12 “Financial Instruments and Risk Management” of this MD&A for
additional information.