Air Canada reports improved fourth quarter 2006 and full year 2006 results
In accordance with Canadian GAAP Accounting Guideline No. 15 Air Canada
is required to consolidate the financial statements of Jazz and certain
leasing entities and fuel facility corporations into its financial
statements. Air Canada does not have any ownership in Jazz. The
financial statements of Air Canada, the mainline airline, are termed Air
Canada Services. With a view to ensure greater clarity, this press
release highlights the performance of Air Canada Services and Jazz
separately.
Air Canada Services
-------------------
2006 FOURTH QUARTER OVERVIEW
- EBITDAR (excluding special charges)(1) of $197 million, an increase of
$92 million on the fourth quarter of 2005.
- Operating loss of $5 million, an improvement of $86 million on 2005.
- Passenger revenues up $122 million or 6 per cent, driven by a
5 per cent growth in traffic on a capacity growth of 4 per cent and a
1 per cent yield improvement.
- Passenger load factor at 77.8 per cent, a record load factor for the
fourth quarter.
- Loss before non-controlling interest, foreign exchange and income taxes
of $57 million compared to a loss of $177 million in 2005.
2006 FULL YEAR OVERVIEW
- EBITDAR (excluding special charges)(1) of $1,043 million compared to
$936 million in 2005.
- Operating income of $114 million, or $236 million excluding special
charges, compared to $191 million in 2005.
- Special charges of $122 million - $102 million ($70 million after tax)
in connection with Air Canada's obligations for redemption of Aeroplan
miles issued before 2002 and special charge for labour restructuring of
$20 million ($13 million after tax).
- Fuel expense increase of $347 million or 16 per cent over 2005.
- Passenger revenues up $690 million or 8 per cent, driven by a
5 per cent growth in traffic on a capacity growth of 4 per cent and a
3 per cent yield improvement.
- Passenger load factor at 80.2 per cent marked a new record load factor
for the year.
- Loss before non-controlling interest, foreign exchange and income taxes
of $77 million compared to a loss of $33 million in 2005.
- Net proceeds of $187 million from the initial public offering of Air
Canada shares.
- Cash, cash equivalents and short-term investments of $2.1 billion at
December 31, 2006.
MONTREAL, Feb. 9 /CNW Telbec/ - Air Canada today reported fourth quarter
Air Canada Services EBITDAR (excluding special charges)(1) of $197 million, an
increase of $92 million on the 2005 quarter. The operating loss of $5 million
recorded in the quarter represented an improvement of $86 million on 2005.
Passenger revenues increased $122 million or 6 per cent due to traffic
growth of 5 per cent reflecting stronger market demand and a yield improvement
of 1 per cent. Passenger revenue improvements were reflected in all markets.
Unit cost, as measured by operating expense per ASM, decreased 1 per cent from
the fourth quarter of 2005.
For 2006, Air Canada Services reported operating income (excluding special
charges)(1) of $236 million, despite an increase in fuel expense of $347
million or 16 per cent. EBITDAR (excluding special charges)(1) amounted to
$1,043 million in the year compared to $936 million in 2005, an improvement of
$107 million. Operating income amounted to $114 million.
Passenger revenues were up $690 million or 8 per cent due to a 3 per cent
yield improvement and a 5 per cent growth in traffic on a capacity increase of
4 per cent. Unit cost, as measured by operating expense per available seat
mile (ASM), rose 4 per cent from 2005. Excluding fuel expense and the special
charge for labour restructuring of $20 million, unit cost was up 1 per cent.
The deficit, on an accounting basis, at December 31, 2006 for pension
benefits was $1.4 billion compared to $2.5 billion at December 31, 2005. The
decrease in the accounting deficit was mainly the result of a strong return on
plan assets and funding of past service contributions in 2006. The solvency
deficit on the registered pension plans at January 1, 2007 is also expected to
decrease significantly compared to January 1, 2006 and, as a result, employer
contributions determined in accordance with regulations, are expected to
decline by approximately $90 million in 2007 and $120 million each year
thereafter.
"I am very pleased to report one of the strongest fourth quarters in Air
Canada's history, capping a year of numerous accomplishments that included the
initial public offering of Air Canada creating an independently traded company
from ACE Aviation," said Montie Brewer, President and Chief Executive Officer.
"Through the hard work and dedication of our employees, we took significant
steps in moving our business plan forward. Our results are on track following
our third consecutive year of record load factors, as we continue to renew our
fleet and ramp up the introduction of a market leading onboard product in the
months to come. Consumers are responding favourably to our value-based fare
products that are successfully differentiating Air Canada from the
competition, and at the same time our distribution costs have been
significantly reduced in line with leading low cost carriers.
"In the months ahead, we expect to see continued positive returns from our
investments in Air Canada's new business model. With the recent consolidation
of all Air Canada flights under one roof at our main Toronto hub, the customer
experience has improved and we will be able to continue leveraging our global
network via one of North America's premier gateway cities. In March, we will
begin taking delivery of new, fuel efficient Boeing 777 widebody aircraft for
our international fleet. Looking forward, revenue and cost performance are on
track aided by continued strong future bookings."
Jazz
----
As reported by Jazz on February 8, 2007, for the full year 2006 the Jazz
segment recorded operating income of $144 million, an improvement of
$15 million from the operating income of $129 million recorded in 2005.
Air Canada Consolidated (including Jazz)
----------------------------------------
On a consolidated basis, Air Canada reported operating income of
$29 million in the fourth quarter compared to an operating loss of $57 million
in the fourth quarter of 2005. Loss before non-controlling interest, foreign
exchange and income taxes for the quarter amounted to $25 million compared to
a loss of $145 million in the fourth quarter of 2005.
For 2006, Air Canada recorded consolidated operating income of
$259 million for the full year 2006, despite a fuel expense increase of
$348 million or 16 per cent, compared to operating income of $318 million in
2005. Excluding special charges of $122 million, operating income(1) of
$381 million represented an increase of $63 million over 2005. Income before
non-controlling interest, foreign exchange and income taxes for the year
amounted to $63 million compared to income of $85 million in 2005.
2006 Air Canada Services Accomplishments
----------------------------------------
- Successfully completed its initial public offering, trading on the TSX
independently from its parent company, ACE Aviation Holdings.
- Recorded a full year load factor of 80.2 per cent, the third
consecutive year the airline achieved a full-year record load factor.
- Eighty per cent on-time arrivals performance ranked as second best in
North America, as measured by U.S. carriers for the 12 month period
October 2005-September 2006.
- Launched 22 new non-stop services including Calgary-New York City,
Edmonton-London Heathrow, Montreal-Denver, Montreal-Mexico City,
Toronto-San Diego and Toronto-Shanghai.
- Began a major refurbishment of its Boeing 767-300 and Airbus narrowbody
fleets installing new seats, seatback personal entertainment systems
and in-seat power throughout both cabins.
- Introduced 15 Embraer E190 aircraft, of a total of 45 on order, joining
3 E190 and 15 E175 aircraft already in service in its North American
fleet.
- Introduced unique "à la carte" pricing, an industry first, enabling
customers to choose the features and services they wish to include in
their fare.
- Forty-six per cent of domestic consumers chose a branded fare higher
than the everyday low Tango fare available.
- Continued to expand its line of multi-flight pass products and grew
pass sales revenue by 148 per cent in 2006; first time pass purchasers
increased by 228 per cent from previous year.
- Introduced the first flat fee subscription Flight Pass, allowing for
unlimited flights within a choice of geographical zones and periods of
time.
- Web penetration for domestic Canada sales in the fourth quarter was
57 per cent, and reached 61 per cent for the month of December.
- Sixty-nine per cent of domestic Canada sales for the fourth quarter
were made directly with Air Canada, either online or through call
centres.
- Eighteen per cent of customers checked in online at aircanada.com,
a threefold increase from the previous year.
- Selected by the editors of Air Transport World to receive the
magazine's Airline Industry Achievement Award for Market Leadership.
- Voted 'Best Airline in North America' and 'Best Airline in Canada' by
the readers of U.S. frequent flyer magazine, Global Traveler, and 'Best
Business Class to Canada' by the readers of Business Traveler magazine.
- Concluded an agreement with ITA Software to develop Air Canada's new
reservation management system, Polaris.
- Successfully completed wage reviews with all major employee groups
except CUPE (for which an arbitration decision is pending), resulting
in average awards of approximately 5 per cent over three years.
- Contributed $477 million to funding its employees' defined benefit
pension plans in 2006, in accordance with the OSFI agreement, of which
$224 million represented funding of past service costs.
- Paid out $25.5 million to Air Canada employees under its 'Sharing Our
Success' monthly incentive program.
(1) Non-GAAP Measures
EBITDAR is a non-GAAP financial measure commonly used in the airline
industry to assess earnings before interest, taxes, depreciation and aircraft
rent. EBITDAR is used to view operating results before aircraft rent and
depreciation, amortization and obsolescence as these costs can vary
significantly among airlines due to differences in the way airlines finance
their aircraft and other assets. EBITDAR is not a recognized measure for
financial statement presentation under GAAP and does not have a standardized
meaning and is therefore not comparable to similar measures presented by other
public companies.
Operating income excluding the special charges for Aeroplan miles and
labour restructuring is a non-GAAP financial measure. Air Canada Services uses
operating income excluding the special charges for Aeroplan miles and labour
restructuring to assess the operating performance of its ongoing business
without the effects of these special charges. These special charges are
excluded from Air Canada Services' results as they could potentially distort
the analysis of trends in business performance.
Readers should refer to Air Canada's 2006 Management's Discussion and
Analysis (MD&A) which will be filed on SEDAR for a reconciliation of EBITDAR
to operating income (loss) and for a reconciliation of operating income (loss)
excluding the special charge for Aeroplan miles and the special charge for
labour restructuring to operating income (loss).
For further information on Air Canada's public disclosure file, including
Air Canada's Annual Information Form, please consult SEDAR at www.sedar.com
CAUTION REGARDING FORWARD-LOOKING INFORMATION
Certain statements in this news release may contain forward-looking
statements. These forward-looking statements are identified by the use of
terms and phrases such as "anticipate", "believe", "could", "estimate",
"expect", "intend", "may", "plan", "predict", "project", "will", "would", and
similar terms and phrases, including references to assumptions. Such
statements may involve but are not limited to comments with respect to
strategies, expectations, planned operations or future actions.
Forward-looking statements, by their nature, are based on assumptions and are
subject to important risks and uncertainties. Any forecasts or forward-looking
predictions or statements cannot be relied upon due to, amongst other things,
changing external events and general uncertainties of the business. Such
statements involve known and unknown risks, uncertainties and other factors
that may cause the actual results, performance or achievements to differ
materially from those expressed in the forward-looking statements. Results
indicated in forward-looking statements may differ materially from actual
results for a number of reasons, including without limitation, energy prices,
general industry, market and economic conditions, war, terrorist attacks,
changes in demand due to the seasonal nature of the business, the ability to
reduce operating costs and employee counts, employee relations, labour
negotiations or disputes, pension issues, currency exchange and interest
rates, changes in laws, adverse regulatory developments or proceedings,
pending and future litigation and actions by third parties as well as the
factors identified throughout Air Canada's filings with securities regulators
in Canada and, in particular, those identified in the Risk Factors section to
Air Canada's 2006 MD&A, which will be filed on SEDAR. . The forward-looking
statements contained herein represent Air Canada's expectations as of the date
they are made and are subject to change after such date. However, Air Canada
disclaims any intention or obligation to update or revise any forward-looking
statements whether as a result of new information, future events or otherwise,
except as required under applicable securities regulations.
AIR CANADA
Selected Financial Information
Quarter 4 2006 versus Quarter 4 2005
The following table reflects the income / loss before non-controlling
interest, foreign exchange, and income taxes of Air Canada and its reportable
segments and earnings before interest, taxes, depreciation, amortization and
obsolescence, and aircraft rent (EBITDAR), which is a non-GAAP measure, for
quarter 4 2006 and quarter 4 2005.
-------------------------------------------------------------------------
UNAUDITED Quarter 4 2006
Inter- Consoli-
(in millions - Air Canada segment dated
Canadian dollars) Services Jazz elimination total
-------------------------------------------------------------------------
Operating revenues
Passenger $ 2,071 - - $ 2,071
Cargo 166 - - 166
Other 178 352 (372) 158
-------------------------------------------------------------------------
2,415 352 (372) 2,395
-------------------------------------------------------------------------
Operating expenses
Salaries, wages and
benefits 443 82 - 525
Aircraft fuel 583 69 (69) 583
Aircraft rent 75 34 (2) 107
Airport and navigation
fees 232 46 (46) 232
Aircraft maintenance,
materials and supplies 205 27 (4) 228
Communications and
information technology 68 2 (1) 69
Food, beverages and
supplies 76 4 - 80
Depreciation, amortization
and obsolescence 135 5 - 140
Commissions 49 - - 49
Capacity purchase fees
paid to Jazz 224 - (224) -
Special charge for labour
restructuring (8) - - (8)
Other 338 50 (27) 361
-------------------------------------------------------------------------
2,420 319 (373) 2,366
-------------------------------------------------------------------------
Operating income (loss) (5) 33 1 29
Non-operating income
(expense)
Interest income 24 2 (1) 25
Interest expense (88) (2) (1) (91)
Interest capitalized 22 - - 22
Gain (loss) on sale of and
provisions on assets (10) - - (10)
Other - (1) 1 -
-------------------------------------------------------------------------
(52) (1) (1) (54)
-------------------------------------------------------------------------
Income (loss) before
non-controlling interest,
foreign exchange and
income taxes $ (57) $ 32 - $ (25)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
EBITDAR 205 72 (1) 276
EBITDAR excluding
special charges 197 72 (1) 268
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
UNAUDITED Quarter 4 2005
Inter- Consoli-
(in millions - Air Canada segment dated
Canadian dollars) Services Jazz elimination total
-------------------------------------------------------------------------
Operating revenues
Passenger $ 1,949 $ 1 - $ 1,950
Cargo 177 - - 177
Other 145 303 (319) 129
-------------------------------------------------------------------------
2,271 304 (319) 2,256
-------------------------------------------------------------------------
Operating expenses
Salaries, wages and
benefits 463 75 - 538
Aircraft fuel 577 62 (62) 577
Aircraft rent 90 28 (1) 117
Airport and navigation
fees 222 37 (37) 222
Aircraft maintenance,
materials and supplies 180 18 (4) 194
Communications and
information technology 72 2 (1) 73
Food, beverages and
supplies 78 3 - 81
Depreciation, amortization
and obsolescence 106 4 - 110
Commissions 47 - - 47
Capacity purchase fees
paid to Jazz 194 - (194) -
Special charge for labour
restructuring - - - -
Other 333 41 (20) 354
-------------------------------------------------------------------------
2,362 270 (319) 2,313
-------------------------------------------------------------------------
Operating income (loss) (91) 34 - (57)
Non-operating income
(expense)
Interest income 14 - 1 15
Interest expense (74) (3) (1) (78)
Interest capitalized 6 - - 6
Gain (loss) on sale of and
provisions on assets (30) 1 - (29)
Other (2) - - (2)
-------------------------------------------------------------------------
(86) (2) - (88)
-------------------------------------------------------------------------
Income (loss) before
non-controlling interest,
foreign exchange and
income taxes $ (177) $ 32 - $ (145)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
EBITDAR 105 66 (1) 170
EBITDAR excluding
special charges 105 66 (1) 170
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
For the year ended December 31 Unaudited Unaudited
(in millions - Canadian dollars) 2006 2005
-------------------------------------------------------------------------
Operating revenues
Passenger $ 8,887 $ 8,199
Cargo 629 625
Other 651 634
-------------------------------------------------------------------------
10,167 9,458
-------------------------------------------------------------------------
Special charge for Aeroplan Miles (102) -
-------------------------------------------------------------------------
10,065 9,458
-------------------------------------------------------------------------
Operating expenses
Salaries, wages and benefits 2,127 2,122
Aircraft fuel 2,545 2,197
Aircraft rent 441 417
Airport and navigation fees 982 924
Aircraft maintenance, materials and supplies 855 751
Communications and information technology 278 297
Food, beverages and supplies 335 334
Depreciation, amortization and obsolescence 514 422
Commissions 237 253
Special charge for labour restructuring 20 -
Other 1,472 1,423
-------------------------------------------------------------------------
9,806 9,140
-------------------------------------------------------------------------
Operating income 259 318
Non-operating income (expense)
Interest income 87 48
Interest expense (321) (284)
Interest capitalized 61 14
Loss on sale of and provisions on assets (6) (27)
Other (17) 16
-------------------------------------------------------------------------
(196) (233)
-------------------------------------------------------------------------
Income before non-controlling interest, foreign
exchange and income taxes $ 63 $ 85
-------------------------------------------------------------------------
-------------------------------------------------------------------------
2006 versus 2005
The following table reflects the income / loss before non-controlling
interest, foreign exchange, and income taxes of Air Canada and its reportable
segments and earnings before interest, taxes, depreciation, amortization and
obsolescence, and aircraft rent (EBITDAR), which is a non-GAAP measure, for
2006 and 2005.
-------------------------------------------------------------------------
UNAUDITED Year ended December 31, 2006
Inter- Consoli-
(in millions - Air Canada segment dated
Canadian dollars) Services Jazz elimination total
-------------------------------------------------------------------------
Operating revenues
Passenger $ 8,887 - - $ 8,887
Cargo 629 - - 629
Other 723 1,381 (1,453) 651
-------------------------------------------------------------------------
10,239 1,381 (1,453) 10,167
Special charge for
Aeroplan miles (102) - - (102)
-------------------------------------------------------------------------
10,137 1,381 (1,453) 10,065
-------------------------------------------------------------------------
Operating expenses
Salaries, wages and
benefits 1,816 311 - 2,127
Aircraft fuel 2,544 285 (284) 2,545
Aircraft rent 314 134 (7) 441
Airport and navigation
fees 982 178 (178) 982
Aircraft maintenance,
materials and supplies 768 98 (11) 855
Communications and
information technology 273 8 (3) 278
Food, beverages and
supplies 322 15 (2) 335
Depreciation, amortization
and obsolescence 493 21 - 514
Commissions 237 - - 237
Capacity purchase fees
paid to Jazz 871 - (871) -
Special charge for labour
restructuring 20 - - 20
Other 1,383 187 (98) 1,472
-------------------------------------------------------------------------
10,023 1,237 (1,454) 9,806
-------------------------------------------------------------------------
Operating income 114 144 1 259
Non-operating income
(expense)
Interest income 82 6 (1) 87
Interest expense (313) (8) (321)
Interest capitalized 62 (1) - 61
Gain (loss) on sale of and
provisions on assets (6) - - (6)
Other (16) (1) (17)
-------------------------------------------------------------------------
(191) (4) (1) (196)
-------------------------------------------------------------------------
Income (loss) before
non-controlling interest,
foreign exchange and
income taxes $ (77) $ 140 - $ 63
-------------------------------------------------------------------------
-------------------------------------------------------------------------
EBITDAR 921 299 (6) 1,214
EBITDAR excluding special
charges 1,043 299 (6) 1,336
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
UNAUDITED Year ended December 31, 2005
Inter- Consoli-
(in millions - Air Canada segment dated
Canadian dollars) Services Jazz elimination total
-------------------------------------------------------------------------
Operating revenues
Passenger $ 8,197 2 - $ 8,199
Cargo 625 - - 625
Other 687 1,021 (1,074) 634
-------------------------------------------------------------------------
9,509 1,023 (1,074) 9,458
Special charge for
Aeroplan miles - - - -
-------------------------------------------------------------------------
9,509 1,023 (1,074) 9,458
-------------------------------------------------------------------------
Operating expenses
Salaries, wages and
benefits 1,857 265 - 2,122
Aircraft fuel 2,197 177 (177) 2,197
Aircraft rent 341 80 (4) 417
Airport and navigation
fees 924 124 (124) 924
Aircraft maintenance,
materials and supplies 693 68 (10) 751
Communications and
information technology 294 5 (2) 297
Food, beverages and
supplies 326 8 - 334
Depreciation, amortization
and obsolescence 404 18 - 422
Commissions 253 - - 253
Capacity purchase fees
paid to Jazz 693 - (693) -
Special charge for labour
restructuring - - - -
Other 1,336 149 (62) 1,423
-------------------------------------------------------------------------
9,318 894 (1,072) 9,140
-------------------------------------------------------------------------
Operating income 191 129 (2) 318
Non-operating income
(expense)
Interest income 48 1 (1) 48
Interest expense (270) (16) 2 (284)
Interest capitalized 14 - - 14
Gain (loss) on sale of and
provisions on assets (31) 4 - (27)
Other 15 - 1 16
-------------------------------------------------------------------------
(224) (11) 2 (233)
-------------------------------------------------------------------------
Income (loss) before
non-controlling interest,
foreign exchange and
income taxes $ (33) $ 118 - 85
-------------------------------------------------------------------------
-------------------------------------------------------------------------
EBITDAR 936 227 (6) 1,157
EBITDAR excluding special
charges 936 227 (6) 1,157
-------------------------------------------------------------------------
Passenger Revenue Analysis
The following table describes quarter-over quarter percentage changes in
passenger revenues, capacity, traffic, passenger load factor, yield per
revenue passenger mile (yield) and passenger revenue per available seat mile
(RASM) for quarter 4 2006 to quarter 4 2005.
-------------------------------------------------------------------------
UNAUDITED
Quarter 4 Passen- Capacity Traffic Passen-
2006 ger ger Load
versus Revenue (ASMs) (RPMs) Factor Yield RASM
Quarter 4 % Change % Change % Change pp Change % Change % Change
2005
-------------------------------------------------------------------------
Canada 6 4 6 1.7 - 2
US transborder 10 11 15 2.0 (4) (1)
Atlantic 4 2 2 - 2 2
Pacific 1 - - 0.1 1 1
Other 6 1 5 3.0 1 5
System 6 4 5 1.1 1 2
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The following table describes year-over year percentage changes in
passenger revenues, capacity, traffic, passenger load factor, yield and RASM
for 2006 to 2005.
-------------------------------------------------------------------------
UNAUDITED
Passen- Capacity Traffic Passen-
2006 ger ger Load
versus Revenue (ASMs) (RPMs) Factor Yield RASM
2005 % Change % Change % Change pp Change % Change % Change
-------------------------------------------------------------------------
Canada 8 4 4 (0.5) 4 3
US transborder 17 12 16 2.5 1 4
Atlantic 5 2 2 0.5 2 3
Pacific 2 - 1 1.4 1 3
Other 9 1 3 1.8 6 8
System 8 4 5 0.7 3 4
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Unit Cost Analysis
The following table compares the Air Canada Services segment's operating
expenses per available seat mile (ASM) for quarter 4 2006 to the Air Canada
Services segment's operating expenses per ASM for quarter 4 2005.
-------------------------------------------------------------------------
UNAUDITED Quarter 4 Change
($ cents per ASM) 2006 2005 $ %
-------------------------------------------------------------------------
Salary and wages 2.60 2.63 (0.03) (1)
Benefits 0.49 0.72 (0.23) (32)
Ownership (DAR) (1) 1.46 1.42 0.04 3
Airport and navigation fees 1.62 1.61 0.01 1
Aircraft maintenance,
materials and supplies 1.43 1.31 0.12 9
Food, beverages and supplies 0.53 0.56 (0.03) (5)
Commissions 0.34 0.34 - -
Capacity purchase fees paid
to Jazz 1.56 1.40 0.16 11
Other 2.83 2.94 (0.11) (4)
-------------------------------------------------------------------------
Operating expense, excluding
fuel expense
and the special charge for
labour restructuring 12.86 12.93 (0.07) (1)
Aircraft fuel 4.06 4.18 (0.12) (3)
Special charge for labour
restructuring (0.05) - (0.05) n/a
-------------------------------------------------------------------------
Total operating expense 16.87 17.11 (0.24) (1)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The following table compares the Air Canada Services segment's operating
expenses per ASM for the year ended 2006 to the corresponding period in 2005.
-------------------------------------------------------------------------
UNAUDITED Change
($ cents per ASM) 2006 2005 $ %
-------------------------------------------------------------------------
Salary and wages 2.35 2.45 (0.10) (4)
Benefits 0.62 0.70 (0.08) (11)
Ownership (DAR) (1) 1.32 1.27 0.05 4
Airport and navigation fees 1.61 1.57 0.04 3
Aircraft maintenance,
materials and supplies 1.26 1.18 0.08 7
Food, beverages and supplies 0.53 0.55 (0.02) (4)
Commissions 0.39 0.43 (0.04) (9)
Capacity purchase fees paid
to Jazz 1.43 1.18 0.25 21
Other 2.70 2.78 (0.08) (3)
-------------------------------------------------------------------------
Operating expense, excluding
fuel expense
and the special charge for
labour restructuring 12.21 12.11 0.10 1
Aircraft fuel 4.17 3.73 0.44 12
Special charge for labour
restructuring 0.03 - 0.03 n/a
-------------------------------------------------------------------------
Total operating expense 16.41 15.84 0.57 4
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) DAR refers to the combination of Aircraft rent and Depreciation,
amortization and obsolescence.
Cash and Short-term Investments
-------------------------------------------------------------------------
-------------------------------------------------------------------------
UNAUDITED
2006
------------------------------------------------
(in millions - Consoli-
Canadian dollars) Air Canada Elimi- dated
Services Jazz nation Total
-------------------------------------------------------------------------
Cash and cash equivalents $ 1,312 $ 135 $ - $ 1,447
Short-term investments 798 - - 798
-------------------------------------------------------------------------
$ 2,110 $ 135 $ - $ 2,245
-------------------------------------------------------------------------
-------------------------------------------------------------------------
2005
-------------------------------------------------------------------------
Consoli-
Air Canada Elimi- dated
Services Jazz nation Total
------------------------------------------------
Cash and cash equivalents $ 1,000 $ 34 $ - $ 1,034
Short-term investments 302 - - 302
-------------------------------------------------------------------------
$ 1,302 $ 34 $ - $ 1,336
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Long-term Debt and Capital Leases
-------------------------------------------------------------------------
-------------------------------------------------------------------------
UNAUDITED Stated
(in millions - Final Interest
Canadian dollars) Maturity Rate 2006 2005
-------------------------------------------------------------------------
Embraer aircraft
financing 2017-2021 6.89-8.49 $ 776 $ 393
Conditional sales
agreements 2019 8.26-8.28 184 193
Lufthansa cooperation
agreement 2009 6.50 44 59
GE loan 2015 11.12 48 51
Revolving credit facility 2010 - - -
Other 2007-2010 4.32-9.10 5 8
-------------------------------------------------------------------------
Direct Corporation debt 1,057 704
-------------------------------------------------------------------------
Jazz - senior syndicated
credit facility 2009 7.09 115 -
Jazz - term loans and credit
facilities - 14
Aircraft and engine leasing
entities - debt 1,051 1,125
Fuel facility corporations
- debt 59 53
-------------------------------------------------------------------------
Debt consolidated under AcG-15 (1) 1,225 1,192
-------------------------------------------------------------------------
Capital lease obligations 1,281 1,365
-------------------------------------------------------------------------
Total debt and capital leases 3,563 3,261
-------------------------------------------------------------------------
Current portion (367) (265)
-------------------------------------------------------------------------
Long-term debt and capital leases $ 3,196 $ 2,996
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The Stated Interest Rate in the table above is the rate as of
December 31, 2006.
(1) CICA HB Accounting Guideline 15, Variable Interest Entities
("AcG-15")
Non-GAAP Financial Measures - EBITDAR
EBITDAR (earnings before interest, taxes, depreciation, amortization and
obsolescence and aircraft rent) is a non-GAAP financial measure commonly used
in the airline industry to view operating results before aircraft rent and
depreciation, amortization and obsolescence as these costs can vary
significantly among airlines due to differences in the way airlines finance
their aircraft and other assets.
EBITDAR is not a recognized measure for financial statement presentation
under Canadian GAAP and does not have a standardized meaning and is therefore
not likely to be comparable to similar measures presented by other public
companies.
EBITDAR is reconciled to operating income (loss) as follows:
-------------------------------------------------------------------------
-------------------------------------------------------------------------
UNAUDITED Quarter 4
(in millions -
Canadian $ $
dollars) 2006 2005 Change 2006 2005 Change
-------------------------------------------------------------------------
Air Canada
Services
GAAP operating
income (loss) (5) (91) 86 114 191 (77)
Add back:
Aircraft rent 75 90 (15) 314 341 (27)
Depreciation,
amortization and
obsolescence 135 106 29 493 404 89
-------------------------------------------------------------------------
EBITDAR 205 105 100 921 936 (15)
Add back:
Special charge
for labour
restructuring (8) - (8) 20 - 20
Special charge
for Aeroplan miles - - - 102 - 102
-------------------------------------------------------------------------
EBITDAR excluding
special charges 197 105 92 1,043 936 107
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Jazz
GAAP operating
income 33 34 (1) 144 129 15
Add back:
Aircraft rent 34 28 6 134 80 54
Depreciation,
amortization and
obsolescence 5 4 1 21 18 3
-------------------------------------------------------------------------
EBITDAR 72 66 6 299 227 72
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Consolidated total
GAAP operating
income (loss) 29 (57) 86 259 318 (59)
Add back:
Aircraft rent 107 117 (10) 441 417 24
Depreciation,
amortization and
obsolescence 140 110 30 514 422 92
-------------------------------------------------------------------------
EBITDAR 276 170 106 1,214 1,157 57
Add back:
Special charge
for labour
restructuring (8) - (8) 20 - 20
Special charge for
Aeroplan miles - - - 102 - 102
-------------------------------------------------------------------------
EBITDAR excluding
special charges 268 170 98 1,336 1,157 179
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Operating Income excluding the Special Charge for Aeroplan Miles and the
Special Charge for Labour Restructuring
The Air Canada Services segment uses operating income excluding the
special charges for Aeroplan miles and labour restructuring to assess the
operating performance of its ongoing business without the effects of these
special charges. These items are excluded from Air Canada Services' segment
results as they could potentially distort the analysis of trends in business
performance. The special charge for Aeroplan miles is the full and final
settlement between the parties in connection with Air Canada's obligations for
the redemption of pre-2002 miles. The special charge for labour restructuring
is the total cost of the 20 percent non-unionized workforce reduction plan
announced in February 2006. The special charges for Aeroplan miles and labour
restructuring are not reflective of the underlying financial performance of
the Air Canada Services segment from ongoing operations.
The following measure is not a recognized measure for financial statement
presentation under Canadian GAAP and does not have a standardized meaning and
is therefore not likely to be comparable to similar measures presented by
other public companies.
Operating income excluding the special charge for Aeroplan miles and the
special charge for labour restructuring is reconciled to operating income as
follows:
-------------------------------------------------------------------------
UNAUDITED
(in millions -
Canadian Q4 Q4
dollars) 2006 2005 Change 2006 2005 Change
-------------------------------------------------------------------------
Air Canada
Services
GAAP operating
income (loss) (5) (91) 86 114 191 (77)
Add back:
Special charge for
Aeroplan miles - - - 102 - 102
-------------------------------------------------------------------------
Operating income
(loss), excluding
the special charge
for Aeroplan
miles (5) (91) 86 216 191 25
Add back:
Special charge for
labour
restructuring (8) - (8) 20 - 20
-------------------------------------------------------------------------
Operating income
(loss), excluding
the special
charges for
Aeroplan miles
and labour
restructuring (13) (91) 78 236 191 45
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
UNAUDITED
(in millions -
Canadian Q4 Q4
dollars) 2006 2005 Change 2006 2005 Change
-------------------------------------------------------------------------
Consolidated total
GAAP operating
income (loss) 29 (57) 86 259 318 (59)
Add back:
Special charge for
Aeroplan miles - - - 102 - 102
-------------------------------------------------------------------------
Operating income
(loss), excluding
the special charge
for Aeroplan
miles 29 (57) 86 361 318 43
Add back:
Special charge
for labour
restructuring (8) - (8) 20 - 20
-------------------------------------------------------------------------
Operating income
(loss), excluding
the special
charges for
Aeroplan miles
and labour
restructuring 21 (57) 78 381 318 63
-------------------------------------------------------------------------
-------------------------------------------------------------------------
%SEDAR: 00024384EF
For further information: Isabelle Arthur (Montréal), (514) 422-5788; Peter Fitzpatrick (Toronto), (416) 263-5576; Angela Mah (Vancouver), (604) 270-5741; aircanada.com