Air Canada 2014 Annual Report Download - page 35

35
2014 Management’s Discussion and Analysis
and U.S. transborder passenger flows, as well as declines on regional routes within Ontario and Quebec
and on routes within Western Canada. These yield decreases were partly offset by yield growth on
transcontinental services.
The domestic PRASM decrease of 1.3% was due to the yield decrease, partly offset by a 0.4 percentage point
improvement in passenger load factor.
U.S. TRANSBORDER PASSENGER REVENUES INCREASED 9.5% FROM THE
FOURTH QUARTER OF 2013
In the fourth quarter of 2014, on a capacity growth of 14.0%, U.S. transborder passenger revenues of
$572 million increased $49 million or 9.5% from the fourth quarter of 2013. The increase in U.S. transborder
passenger revenues was due to traffic growth of 15.5% partly offset by a yield decline of 5.0%.
The table below provides year-over-year percentage changes in U.S. transborder passenger revenues and
operating statistics for the fourth quarter of 2014 and each of the previous four quarters.
YEAR-OVER-YEAR BY QUARTER (% CHANGE)
Q4’13 Q1’14 Q2’14 Q3’14 Q4’14
U.S. TRANSBORDER
Passenger revenues 8.1 5.7 11.5 11.2 9.5
Capacity (ASMs) 1.6 1.9 12.2 12.7 14.0
Traffic (RPMs) 4.0 5.7 16.2 16.2 15.5
Passenger load factor (pp change) 1.8 2.9 2.8 2.5 1.1
Yield 4.2 0.3 (3.3) (3.7) (5.0)
PRASM 6.6 4.0 0.1 (0.7) (3.7)
In the fourth quarter of 2014, the 14.0% U.S. transborder capacity growth reflected capacity increases on
certain U.S. long-haul routes such as Los Angeles and San Francisco, on certain U.S. short-haul routes, such as
Chicago, and on services to Florida, Las Vegas and Hawaii. This capacity growth was partly offset by capacity
reductions on certain long-haul routes such as Denver.
Components of the year-over-year change in fourth quarter U.S. transborder passenger revenues included:
• The 15.5% traffic increase which reflected traffic growth on all major U.S. transborder services with the
exception of services from eastern Canada to the U.S. where capacity was reduced year-over-year. The
traffic growth was achieved through additional long-haul capacity and improved load factors on short-haul
flying. The year-over-year increase in traffic was largely due to significantly higher proportional growth of
lower-yielding international-to-international passenger flows from the U.S., as well as strong passenger
demand on services between Canada and the U.S.
• The 5.0% yield decline which largely reflected a 3.6% longer average stage length, driven by route
composition changes as long-haul (lower-yielding) capacity grew while short-haul (higher-yielding) capacity
was unchanged when compared to the fourth quarter of 2013. This increase in average stage length had
the effect of reducing U.S. transborder yield by 2.0 percentage points. Long-haul growth was led by lower-
cost Air Canada rouge flying allowing Air Canada to effectively compete on lower-yielding leisure routes.
Additionally, the fourth quarter of 2014 experienced a higher proportion of lower-yielding incremental
international-to-international passenger flows in support of the airline’s international expansion strategy.
These yield decreases were partly offset by a favourable currency impact of $9 million and a significant
increase in high-yielding short-haul traffic.
PRASM decreased 3.7% as the lower yield was partly offset by a passenger load factor improvement of
1.1 percentage points.