Air Canada 2014 Annual Report Download - page 37

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37
2014 Management’s Discussion and Analysis
The table below provides year-over-year percentage changes in Pacific 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
PACIFIC
Passenger revenues (3.2) 1.2 5.7 8.3 6.5
Capacity (ASMs) 4.4 4.6 1.8 1.6 9.5
Traffic (RPMs) 0.7 3.2 4.1 3.6 7.6
Passenger load factor (pp change) (3.0) (1.1) 1.9 1.7 (1.4)
Yield (4.0) (1.6) 1.8 4.9 (0.8)
PRASM (7.4) (2.8) 4.1 7.0 (2.5)
In the fourth quarter of 2014, the 9.5% Pacific capacity growth reflected capacity increases on all services with
the exception of Korea.
Components of the year-over-year change in fourth quarter Pacific passenger revenues included:
• The 7.6% traffic increase which reflected traffic growth on all major Pacific services.
• The 0.8% yield decline which mainly reflected yield decreases on services to Hong Kong and China.
Air Canada operates a lower-cost Boeing 777 higher-density aircraft on its Vancouver-Hong Kong
service which has a larger economy cabin. The use of this lower-cost aircraft on high-volume routes, such as
Vancouver-Hong Kong, is allowing the airline to access traditionally lower-yielding traffic while improving
profitability. Hong Kong’s “Occupy Central” political protest movement also negatively impacted Hong Kong
yields in the fourth quarter of 2014. The yield reduction on services to China was largely driven by increased
industry capacity from the U.S. and aggressive pricing activities. These yield decreases were largely offset by
improvements in Air Canada’s business cabin revenue performance, an increase in premium economy traffic
which resulted in higher average fares, and a favourable currency impact of $6 million.
The 2.5% PRASM decrease was due to a decrease in passenger load factor of 1.4 percentage points and the
yield decline.
OTHER PASSENGER REVENUES INCREASED 0.4% FROM THE
FOURTH QUARTER OF 2013
In the fourth quarter of 2014, on capacity growth of 3.9%, Other passenger revenues (comprised of routes to the
Caribbean, Mexico and Central and South America) of $182 million increased 0.4% from the fourth quarter of 2013.
The increase in Other passenger revenues was due to traffic growth of 3.0% partly offset by a yield decline of 2.7%.
The table below provides year-over-year percentage changes in Other 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
OTHER
Passenger revenues 11.5 11.0 17.7 0.5 0.4
Capacity (ASMs) 0.6 (1.0) 11.0 2.2 3.9
Traffic (RPMs) 5.0 3.1 15.7 3.6 3.0
Passenger load factor (pp change) 3.4 3.3 3.5 1.1 (0.6)
Yield 6.5 8.5 2.6 (2.4) (2.7)
PRASM 11.1 12.9 7.0 (1.1) (3.4)
In the fourth quarter of 2014, the 3.9% capacity growth reflected capacity increases on routes to Mexico and
to traditional sun destinations largely offset by a capacity reduction on services to South America.