Feb 01, 2016
Improved Performance
2002 2001(millions) Q2 Q2 Change
Oper. Revenue $2,552 $2,564 $ (12)
Oper. Expense 2,490 2,636 (146)
Oper. Income (Loss) 62 (72) 134
Non-oper. Expense (46) (71) 25
Income (Loss) Before FX & Tax $ 16 $ (143) $ 159
FX on L/T Monetary Items 19 161 (142)
Income (Loss) Before Tax $ 35 $ 18 $ 17
Best Operating Results* of any Major International Carrier in North America
* Pre-government assistance - US = 6 majors
% OPERATING MARGIN
2001 2002
Air Canada Revenue Recovering Faster
Q2 2002/2001 % CHANGE
Air Canada’s 2nd Quarter RASM Outperforms Industry
* Mainline** Source ATA
YEAR/YEAR % CHANGE
2001 2002
July/August Traffic* Stable
2002
* Mainline
YEAR/YEAR % CHANGE
Air Canada Unit Cost** Performance Outpaces US Industry
YEAR/YEAR % CHANGE
* Mainline* * Adjusted for one-timers; US = 6 majors
2001 2002
All Expense Categories Down Except Ownership, User Fees, Mtce. and Insurance
Q2 2002/2001
Mainline
Higher Fleet ProductivityY-T-D Aug ASM’s* 2%, Block Hrs* 10%
2002
* Mainline
YEAR/YEAR % CHANGE
ASMs
Block Hours
Positioned For The Future
1. Multi-brand strategy
2. Increasing employee productivity
3. Falling distribution costs
4. Fleet simplification and commonality
5. Six Sigma
6. Low cap-ex and moderate debt repayment
Air Canada’s Products
Air Canada’s Products - Tango
• Low fare/leisure
• Simplified product
• Supplemental flying in key markets
• Medium, long haul
• Domestic, transcontinental, sun
• Point to point
• No interlining
• Low product cost
• Mainline labour cost
• Low fare/business/ leisure
• Simplified product
• Domestic/transborder
• Point-to-point, short haul
• Full interlining
• Low product cost
• Low labour cost
Air Canada’s Products - Zip
Underlying Tango Profitability
• Revenue certainty– no overbooking, no denied boardings
• No refunds• Single class seating• Low distribution costs
– 80% to 90% internet bookings– Global Distribution Systems (GDS) by-pass– all e-ticket
• “All frills extra” onboard service• No interlining, no baggage transfer• Fast turnaround, higher aircraft utilization• Low overhead
Employee Productivity Continues To Improve
Air Canada Pre-merger
Air Canada + CAIL as of June 30/00
ASM = Available Seat Mile* YTD + estimate for balance of year** Mainline
*Combined
ASM per EMPLOYEE**
Agency Commissions Cut By More Than Half Since 1998
9.3%
7.6%6.6%
5.9%
4.4%
COMMISSIONS AS % OF PASSENGER REVENUE
* YTD + estimate for balance of year
*
Narrow Body FleetMoving to all Airbus
2000 2002
167 Aircraft 157 Aircraft
DC-910%Airbus
49%B-73726%
Airbus67%
B-73717%
CRJ15%
CRJ16%
To be replaced with Airbus aircraft when leases expire - some initially going to Zip.
Implementing Six Sigma
MBB = Master Black Belt, BB = Black Belt, GB= Green Belt
Trained Personnel
Target Areas
• Operations
– Airports, Air Canada Technical Services, System Operations Control, Flight Ops, Inflight Services, Call Centres, Air Canada Jazz, Aeroplan, Air Canada Vacations
• Staff
– Marketing, Sales, Network Planning, Human Resources, Law, IT, Purchasing, Destina.ca
2002 2003
8 MBB 15 MBB30 BB 120 BB320 GB 1,380 GB
Low Cap-Ex & Moderate Debt Repayment
• Cap-Ex
– Annual steady state cap-ex = $200 million
– 2003 & 2004 aircraft deliveries fully financed
• ten A319/320/321s• two A340-500s• three A340-600s
• Debt Repayment
– $375 million second half of 2002 (mostly behind us)
– $220 million in 2003
Good Liquidity
• $0.9 billion in cash at June 30, 2002.
• Generating positive cash flow from operations.
• Approximately $2.8 billion of unencumbered assets
– aircraft
– engines and spares
– inventory
– real estate
– lease deposit receivables
– accounts receivable
Significant Value In Air Canada’s Business Units