Air Canada · TSX:AC
Air Canada — Shareholder Meeting (June 2010)
72 slides from Air Canada's shareholder meeting presentation, June 2010
Slide 1: 2010 Annual and Special Meeting of Shareholders
2010 Annual and Special Meeting of Shareholders 1
Slide 2: Forward-looking statements notice
This presentation includes forward-looking statements. For a discussion of risk factors and assumptions please see the section entitled Caution Regarding Forward-Looking Information later in this presentation.
Slide 3: Calin Rovinescu
Calin Rovinescu 3
Slide 4: Carolyn Hadrovic
Carolyn Hadrovic 4
Slide 5: Michael Rousseau
Michael Rousseau 5
Slide 6: 2010 Annual and Special Meeting of Shareholders
2010 Annual and Special Meeting of Shareholders Good morning ladies and gentlemen and for those shareholders from out of town I extend a warm welcome to Montreal for the 2010 annual and special meeting of Air Canada shareholders. I appreciate that each of you has made time for us in your busy schedu
Slide 7: Global Industry
Global Industry $10B industry loss last year 3.5% traffic loss The last two years have been difficult for our industry as a whole. Airlines are always the first affected by and the last to recover from economic downturns and recessionary conditions. IATA estimates our industry collectively lost over
Slide 8: Global Industry
Global Industry IATA called 2009 the worst year for the industry in terms of lost traffic It called 2009 the worst year ever for the industry in terms of lost traffic. 8
Slide 9: Favourable Revenue Performance
Favourable Revenue Performance 0% % variance YOY -1.2 -4% -4.5 -8% -8.4 -12% -11.5 -11.3 -12.4* -12.2 -12.4 -14.3 -14.5 -16% LUV JBLU AAI WJA AC AMR UAL LCC DAL CAL *WestJet excludes charter revenues For its part, Air Canada did well relative to other legacy carriers. Our revenue performance compare
Slide 10: Global Industry
Global Industry 80.7% – System-load factor vs. 75.6% for industry 31 million more passengers carried SAFELY Moreover, we managed capacity effectively. In 2009 we flew our planes with a system-wide load factor of 80.7 per cent on average versus 75.6 per cent for the industry as a whole. We carried cl
Slide 11: Customer Re-engagement
Customer Re-engagement Improved year-over-year customer satisfaction metrics Significant industry awards based on customer feedback We also delivered in two other areas that I consider a priority. We improved our year-over-year customer satisfaction metrics and received several significant industry
Slide 12: Environmental Performance
Environmental Performance Saved 18 million litres of fuel or nearly 45,000 tonnes of CO2 emissions On the environmental front, operational measures alone enabled us to save 18 million litres of fuel. This translates into a reduction of nearly 45,000 tonnes of CO2 emissions – the equivalent of removi
Slide 13: 2009 Results
2009 Results Achieved 2009 adjusted EBITDAR $316M operating loss $1.2B (12%) decline in passenger revenue 33% attributed to premium market Yet while we achieved our 2009 adjusted EBITDAR target, like many other carriers last year, we still reported an operating loss albeit a materially lower net los
Slide 14: 2009 Results
2009 Results 5.4% decrease in unit cost 3.3% increased CASM Weak Canadian dollar Our unit costs decreased 5.4 per cent. However, once fuel expenses are excluded, our Cost per Available Seat Mile or CASM increased 3.3 per cent from 2008, largely due to a weaker Canadian dollar versus the U.S. dollar
Slide 15: Economic Downturn
Economic Downturn Starting with the dramatic fuel price spike in 2008 followed by the economic downturn late in the year and carrying on into 2009, we encountered a series of interconnected events that created serious hurdles for our company - expressed simply, we had many predicting our demise. How
Slide 16: Pension Deficit
Pension Deficit 40% drop in equity markets Low long-term government bond rates As for our pension plan challenges, in 2008 our plans performed adequately in relation to other Plans – in the Second Quartile. But the combination of a 40 per cent drop in equity markets in 2008, coupled with historicall
Slide 17: Solving the Puzzle
Solving the Puzzle Liquidity Cost structure Supplier arrangements Credit card processor covenants Collective agreements Pension deficit Customer and employee engagement I often used the analogy of a Rubik’s cube to describe our predicament. We were faced with multiple issues and none could be solved
Slide 18: Solving the Puzzle: Lenders and credit card processors
Solving the Puzzle Lenders and credit card processors Relaxed cash requirements Early on we got lenders and credit card processors to relax their cash requirements, all conditional on some permanent funding coming in. 18
Slide 19: Solving the Puzzle: Collective Agreements
Solving the Puzzle Collective Agreements Extended to 2011 Cost neutral One-by-one we negotiated contract extensions to 2011 with our unions on a cost neutral basis. 19
Slide 20: Solving the Puzzle: Pensions
Solving the Puzzle Pensions 21-month deficit funding moratorium Nearly $400M defined benefit pension contributions for 2009 Along with that, our five major Canadian unions agreed to pension funding arrangements that provided for a 21-month moratorium on past service contributions and fixed payments
Slide 21: Solving the Puzzle: Suppliers and partners
Solving the Puzzle Suppliers and partners Demonstrated a vested interest in Air Canada These agreements were inter- dependant on other agreements with other key suppliers and partners who agreed to rework, improve and extend contracts to make them more competitive with market rates. In effect, demon
Slide 22: Solving the Puzzle: Liquidity
Solving the Puzzle Liquidity $1B raised through partners $250M equity financing With everything in place, we announced on July 29 – – that we had raised more than $1 billion from a diverse group that included our major shareholder, several key business partners and other lenders and stakeholders. Bu
Slide 23: Creative, innovative, nimble, flexible
creative innovative nimble flexible As of April 30 of this year 2010, liquidity position measured by cash, cash equivalents and short term investments had strengthened to $1.7B Stock up 200% In summary we stabilized the company against great odds and demonstrated in the process that a 72- year-old f
Slide 24: Transformation for the Future
Transformation for the Future With our company stabilized, we are now focused on the transformation that must occur if we are to make Air Canada a sustainably profitable company over the long term. 24
Slide 25: Global Champions
Global Champions AT Kearney published list of 25 Global Champions (countries) U.S.A. (8) Japan (2) South Korea (2) France Spain (2) Australia India Switzerland (2) China Mexico Israel Brazil South Africa More broadly, I believe Air Canada can aspire to become nothing less than a Global Champion, a c
Slide 26: Global Champions
Global Champions Balance economic, environmental and social considerations Strong leadership Focused Ability to shift gears On the whole, they were seen to have pursued a growth strategy that balanced economic, environmental and social considerations. Size per se did not matter but strong leadership
Slide 27: Cost Transformation Program
Cost Transformation Program $500M by 2011 2009: surpassed $50M target by 40% As of May 2010 on a run rate basis $255M of $270M target for 2010 $281M of $500M 2011 goal achieved The first element is our Cost Transformation Program, which is aimed at achieving $500 million in recurring annual cost and
Slide 28: Cost Transformation Program
Cost Transformation Program new technologies new processes empowerment greater productivity Importantly, we are doing this without compromising the passenger experience. Cost transformation is about much more than simple cost reduction. It means technology. It means different processes. It means man
Slide 29: Customer Experience
Customer Experience The second element of our transformation is a renewed emphasis on the customer experience. We intend to achieve this through a concerted re-engagement with our customers, our partners, the travel trade, and Star Alliance. 29
Slide 30: Customer Experience
Customer Experience One example of this is that we were the first North American airline to introduce new IT services for customers through popular Apple and Blackberry applications with automatic flight notification and rebooking tools. These provide information in real time, the way customers want
Slide 31: Customer Experience
Customer Experience Remove irritants Call Centre fees Increased Aeroplan reward seats Small pets in cabin Improvements to Super Elite product Restored commissions Conversely, we have eliminated many customer irritants. Among other things we revoked call centre fees, increased the availability of Aer
Slide 32: Customer Experience
Customer Experience Premium customer loyalty Attract new premium customers Industry-leading business class product As I mentioned earlier, an airline such as Air Canada depends highly on premium traffic. This was the segment of our business most severely affected by the recession, so providing a sup
Slide 33: Customer Experience
Customer Experience We will add product enhancements to our industry-leading premium suite of Maple Leaf Lounges, Concierge Program and international Executive First service with lie flat suites – The first in North America I might add. And let’s not forget the strength of Aeroplan – our commitment
Slide 34: Customer Experience
Customer Experience Business Traveler Magazine 500,000 readers voted: Best Flight Attendants in North America Best In-flight Services in North America Best Business Class among North American carriers Best North American Airline for International Travel Business Traveler, a magazine with 500,000 rea
Slide 35: Customer Experience
Customer Experience Global Traveler Magazine 25,000 readers voted: Best Airline in Canada Best Airline in North America A survey of 25,000 readers of the equally respected Global Traveler magazine found Air Canada to be the Best Airline in Canada and Best Airline in North America. And the recognitio
Slide 36: Customer Experience
Customer Experience Reader’s Digest Canadians coast-to-coast voted: Most trusted airline This April, Reader’s Digest declared Air Canada the country’s “most trusted airline” based on an independent survey of Canadians coast-to-coast. 36
Slide 37: Customer Experience
Customer Experience Skytrax 17 million air travellers from 100 different countries voted: Best Airline: North America The most significant accolade was perhaps the one received last week when the independent research firm Skytrax ranked Air Canada Best Airline in North America after an exhaustive su
Slide 38: Customer Experience
Customer Experience So let me pause here. These surveys and awards suggest you are shareholders of the Best Airline in North America, the most competitive market place in the world. And one of the best airlines in the World. This franchise is very, very strong and we intend to make it stronger. 38
Slide 39: Culture Change
Culture Change While these awards are positive proof that Air Canada is moving in the right direction in re-engaging with its customers, we know we have more work to do and that is why the third element of our transformation is culture change. Culture change is always the greatest challenge for an o
Slide 40: Culture Change
Culture Change Become more entrepreneurial, nimble Just do it Employee brand Leaders and Ambassadors With the right drivers – both in terms of people and tools – Air Canada can and will absolutely become a more entrepreneurial and nimble company. It will become a place with a just do it culture, whe
Slide 41: Leading International Carrier
Leading International Carrier Canada is 36th in population Air Canada is 13th largest airline in the world The fourth key element of our transformation entails building on our position as one of the world's leading international carriers. I always find it telling that Canada is 36th in terms of popu
Slide 42: Leading International Carrier
Leading International Carrier We benefit from Canada’s excellent geographic position. We have a vast network underpinned by an array of bilateral authorities to fly to other countries. And, more than this, 42
Slide 43: Founding partner of the Star Alliance
we are a founding partner of the 27-member Star Alliance, the strongest global airline network. Star enables us to seamlessly connect passengers with carriers that fly to over 1,160 airports in more than 180 countries. Such connecting traffic drives growth and for us, the strength of the network is
Slide 44: Brussels Airlines' admission to Star Alliance
For example, Brussels Airlines’ recent admission to Star Alliance made it attractive for Air Canada to begin flying to Brussels. This opened not only another European gateway for customers especially throughout France, 44
Slide 45: Leading International Carrier
Leading International Carrier Brussels Montreal but also a convenient connecting point for travel between Canada and Africa, which is extremely well served by Brussels Airlines. Air Canada currently carries only 5 per cent of traffic between Canada and Africa, but we believe this new partnership wil
Slide 46: Atlantic-Plus-Plus joint venture
Beyond Star Alliance, we have joined with Lufthansa, United Airlines and Continental Airlines to form Atlantic-Plus-Plus, a joint venture through which each carrier sells seats on the other as if we were one large airline with a single network. In effect, “metal neutrality” - that over time we becom
Slide 47: Leading International Carrier
Leading International Carrier Since last year we have already added or announced new service to Geneva, Rome, Brussels, Athens and Barcelona that will strengthen our European flagship routes of London, Paris and Frankfurt. In March, we launched our first Calgary-Tokyo flight and today we re-introduc
Slide 48: Leading International Carrier
Leading International Carrier In fact, we need a dynamic domestic operation to feed our international growth opportunities which we will further leverage by connecting U.S. traffic via our hubs in Toronto, Montreal, Calgary and Vancouver. For many parts of the U.S., the fastest and easiest route to
Slide 49: Financial Results Q1 2010
Financial Results Q1 2010 Of course, anyone familiar with the airline industry knows that more than any other business it is susceptible to extraneous shocks. In this past year alone, our company has faced the worst post-war recession, a major stock market meltdown, severe storms, earthquakes in Hai
Slide 50: Q1 2010 results
Q1 2010 Reduced operating loss to $126M from $188M a year ago, an improvement of $62M Increased operating revenues to $128M or 5% from same quarter in 2009 EBITDAR of $138M increased $81M from prior year or 142% from the same quarter in 2009 Traffic increased year-over-year each month in the first q
Slide 51: 2010 Winter Games
One of these was the 2010 Winter Games. As the Official Airline for the Vancouver Olympic and Paralympic Games, we had great success on many fronts – we raised brand awareness globally through our multi-year sponsorship and our ‘Elite Podium” program which provided athletes, coaches and mission staf
Slide 52: The Olympic and Paralympic Games
The Olympic and Paralympic Games And based on the very positive feedback from IOC officials and others who attended Olympic events around the world over the years, our employees also delivered Canada’s 15th gold medal in the form of a technically accomplished and overall outstanding performance. We
Slide 53: ACtion Haiti
ACtion Haiti A sad contrast to the Olympic euphoria was the Haiti earthquake. But here I witnessed first hand the “Just Do It” spirit channeled into the laudable goal of relieving human suffering. 53
Slide 54: ACtion Haiti
ACtion Haiti Under the leadership of Duncan Dee, our Chief Operating Officer, our employees swiftly volunteered to launch relief flights to Haiti and we made six special flights altogether. In the weeks following the disaster 54
Slide 55: ACtion Haiti
ACtion Haiti Air Canada delivered nearly 200 tonnes of cargo – consisting of lifesaving items such as medicine, food and tents – and we evacuated nearly 500 people, including orphaned children. 55
Slide 56: ACtion Haiti
ACtion Haiti One flight carried a three-month-old baby and a 114-year-old woman. I was never so proud of our airline and our employees who raised money, bought supplies and volunteered to operate flights or serve as caregivers for children coming to Canada. 56
Slide 57: ACtion Haiti
ACtion Haiti And our commitment to Haiti is ongoing. Fundraising continues, supplies are still being shipped on scheduled flights and we recently ran a very successful clothing drive. For the longer term, with employee involvement in raising money, we have committed to fund a more permanent project.
Slide 58: Eyjafjallajokull Volcano
Eyjafjallajokull Volcano More recently, our employees again exhibited this same level of committed professionalism in dealing with the volcano eruption in Iceland. The six-day closure of European airports and airspace put heavy and unexpected demands on all parts of the company. It was immediately e
Slide 59: Ability, determination, plan
ability determination plan Air Canada has the ability, the determination and the aspiration to truly become a Global Champion. We are pursuing growth in a rational way with measured risks – one that balances financial, social and environmental considerations – and our aim is to transform our company
Slide 60: Thanks to employees, unions, shareholders and partners
To close, I wish to say thank you to Air Canada’s 26,000 employees. Their dedication, professionalism and commitment to transporting our customers safely is both an inspiration for me and a model for other airlines. As well, I would like to thank the leaders of our union groups for working through t
Slide 61: Thank you
I look forward to seeing you again next year with more progress to report on our transformation into a global champion. Thank you. 61
Slide 62: Bernard Attali
ena aw aan” Bernard Attali 62
Slide 63: Michael M. Green
Michael M. Green 63
Slide 64: Jean Marc Huot
Jean Marc Huot 64
Slide 65: Pierre Marc Johnson
Pierre Marc Johnson 65
Slide 66: Joseph B. Leonard
Joseph B. Leonard 66
Slide 67: Arthur T. Porter
Arthur T. Porter 67
Slide 68: Roy Romanow
Roy Romanow 68
Slide 69: Calin Rovinescu
Calin Rovinescu 69
Slide 70: Vagn Sørensen
Vagn Sørensen 70
Slide 71: Caution Regarding Forward-looking Information
Caution Regarding Forward-looking Information Air Canada’s public communications may include forward-looking statements within the meaning of applicable securities laws. Such statements are included in this presentation and may be included in other filings with regulatory authorities and securities
Slide 72: Thank you
I look forward to seeing you again next year with more progress to report on our transformation into a global champion. Thank you. 72