Air Canada · TSX:AC

Air Canada — Q2 2010 Earnings Presentation

23 slides from Air Canada's earnings presentation, Aug 5, 2010

  1. Slide 1: Second Quarter Financial Results

    2010 Second Quarter Financial Results August 5, 2010

  2. Slide 2: Table of Contents

    Table of Contents • Financial Highlights • Passenger Revenue • Operating Expense 2

  3. Slide 3: Financial Highlights – Results of Operations

    Financial Highlights – Results of Operations Q2 10 / Q2 09 (millions) Q2 2010 Q2 2009 Change Operating Revenue $ 2,625 $ 2,330 $ 295 Operating Income (Loss) $ 75 $ (113) $ 188 EBITDAR $ 333 $ 135 $ 198 Net Income (Loss) $ (203) $ 155 $ (358) Operating Margin 2.9% (4.8)% 7.7 PP EBITDAR Margin 12.7% 5

  4. Slide 4: Financial Highlights – Financial Position and Cash Flow

    Financial Highlights – Financial Position and Cash Flow Q2 10 / Q2 09 (millions) Q2 2010 Q2 2009 Change Cash Flow from (used for) Operations (1) $ 320 $ (91) $ 411 Additions to Capital Assets $ (23) $ (49) $ 26 Free Cash Flow $ 297 $ (140) $ 437 Cash, Cash Equivalents & Short-term $ 1,815 $ 907 $ 90

  5. Slide 5: Non-Operating Expense

    Non-Operating Expense Q2 10 / Q2 09 (millions) Q2 2010 Q2 2009 Change Net Interest Expense (1) $ (129) $ (88) $ (41) Loss on Assets $ - $ (71) $ 71 Gain (Loss) on Financial $ (18) $ 79 $ (97) Instruments Total Non-Operating Expense $ (147) $ (80) $ (67) (1) Q2 10 includes a charge of $54M in interes

  6. Slide 6: Q2 2010 Versus Q2 2009

    Q2 2010 Versus Q2 2009 Passenger Capacity Traffic Passenger Revenue (ASMs) (RPMs) LF Yield RASM (%) (%) (%) (PP) (%) (%) Canada  6.8  0.2  2.9  2.5  3.7  7.0 US Transborder  11.3  7.3  10.3  2.0  0.8  3.6 Atlantic  12.8  2.4  3.2  0.7  9.2  10.0 Pacific  37.3  17.5  27.0  6.7 

  7. Slide 7: System Capacity Increased 5.3% due to Expanded Int'l Operations

    System Capacity Increased 5.3% due to Expanded Int'l Oper. & Leveraging Toronto Hub as a Global Transfer Point (Y-O-Y Changes in Capacity) % Change in ASMs 15% 10% 5% 0% -5% -10% Canada U.S. Int'l Total Q2 2009/2008 Q3 2009/2008 Q4 2009/2008 Q1 2010/2009 Q2 2010/2009 7

  8. Slide 8: System Traffic Increased 8.7% on Capacity Growth of 5.3%

    System Traffic Increased 8.7% on Capacity Growth of 5.3% (Y-O-Y Changes in Traffic) % Change in RPMs 15% 10% 5% 0% -5% -10% -15% Canada U.S. Int'l Total Q2 2009/2008 Q3 2009/2008 Q4 2009/2008 Q1 2010/2009 Q2 2010/2009 8

  9. Slide 9: Yield Up 3.3% due to Modest Improvement in the Economic Environment

    Yield Up 3.3% due to Modest Improvement in the Economic Environment Compared to Q2'09 (Y-O-Y Changes in Passenger Yield) % Change in Yield 10% 5% 0% -5% -10% -15% Canada U.S. Int'l Total Q2 2009/2008 Q3 2009/2008 Q4 2009/2008 Q1 2010/2009 Q2 2010/2009 9

  10. Slide 10: System RASM Increased 6.6%

    System RASM Increased 6.6% due to 3.3% Yield Growth and 2.6 PP Passenger Load Factor Improvement (Y-O-Y Changes in Revenue per ASM) % Change in RASM 15% 10% 5% 0% -5% -10% -15% Canada U.S. Int'l Total Q2 2009/2008 Q3 2009/2008 Q4 2009/2008 Q1 2010/2009 Q2 2010/2009 10

  11. Slide 11: System Revenues Increased 12.4%

    System Revenues Increased 12.4% due to 8.7% Traffic Growth and 3.3% Yield Improvement (Y-O-Y Changes in Passenger Revenue) % Change in Revenue 20% 15% 10% 5% 0% -5% -10% -15% -20% Canada U.S. Int'l Total Q2 2009/2008 Q3 2009/2008 Q4 2009/2008 Q1 2010/2009 Q2 2010/2009 11

  12. Slide 12: Canada – RASM Increased 7.0%

    Canada – RASM Incr. 7.0% due to 3.7% Yield growth and 2.5 PP LF Improvement Y-O-Y Change Capacity (ASM) Load Factor % Change PP Change 5 3 2 0 1 0 -5 -1 -2 -10 -3 Q2 Q3 Q4 Q1 Q2 Q2 Q3 Q4 Q1 Q2 2009 2010 2009 2010 % Change Yield % Change RASM 5 10 5 0 0 -5 -5 -10 -10 -15 -15 Q2 Q3 Q4 Q1 Q2 Q2 Q3 Q4 Q

  13. Slide 13: US Transborder – RASM Increased 3.6%

    US Transborder – RASM Increased 3.6% due Mostly to 2.0 PP LF Improvement – But Also a 0.8% Higher Yield Y-O-Y Change Capacity (ASM) Load Factor % Change PP Change 10 4 2 5 0 0 -2 -5 -4 -10 -6 Q2 Q3 Q4 Q1 Q2 Q2 Q3 Q4 Q1 Q2 2009 2010 2009 2010 % Change Yield % Change RASM 5 5 0 0 -5 -5 -10 -10 -15 Q2

  14. Slide 14: Atlantic – RASM Increased 10.0%

    Atlantic – RASM Increased 10.0% due Mostly to 9.2% Yield Growth – But also a 0.7 PP LF Improvement Y-O-Y Change Capacity (ASM) Load Factor % Change PP Change 10 2 5 0 0 -2 -5 -4 Q2 Q3 Q4 Q1 Q2 Q2 Q3 Q4 Q1 Q2 2009 2010 2009 2010 Yield RASM % Change % Change 10 15 5 10 5 0 0 -5 -5 -10 -10 -15 -15 Q2 Q

  15. Slide 15: Pacific – RASM Increased 16.9%

    Pacific – RASM Increased 16.9% due to 8.1% Higher Yield and 6.7 PP Load Factor Improvement Y-O-Y Change Capacity (ASM) Load Factor % Change PP Change 30 8 20 6 4 10 2 0 0 -10 -2 -20 -4 Q2 Q3 Q4 Q1 Q2 Q2 Q3 Q4 Q1 Q2 2009 2010 2009 2010 Yield RASM % Change % Change 10 20 5 10 0 0 -5 -10 -10 -15 -20 Q2

  16. Slide 16: Australia, Caribbean, Mexico & S. A. ("Other")

    Australia, Caribbean, Mexico & S. A. ("Other") – RASM Incr. 4.5% due to 2.2% Higher Yield & 1.8 PP LF Improvement Y-O-Y Change Capacity (ASM) Load Factor % Change PP Change 15 4 10 2 5 0 0 -5 -10 -2 Q2 Q3 Q4 Q1 Q2 Q2 Q3 Q4 Q1 Q2 2009 2010 2009 2010 Yield RASM % Change % Change 10 10 0 0 -10 -10 -20

  17. Slide 17: Total – RASM Increased 6.6%

    Total – RASM Incr. 6.6% due to 3.3% Higher Yield and 2.6 PP LF Improvement Y-O-Y Change Capacity (ASM) Load Factor PP Change % Change 10 3 2 5 1 0 0 -1 -5 -2 -10 -3 Q2 Q3 Q4 Q1 Q2 Q2 Q3 Q4 Q1 Q2 2009 2010 2009 2010 % Change Yield % Change RASM CASM RASM 5 10 0 5 0 -5 -5 -10 -10 -15 -15 Q2 Q3 Q4 Q1 Q

  18. Slide 18: S&W Expenses Up 8.0% due to Increase in Pension Expenses

    S&W Expenses Up 8.0% due to Increase in Pension Expenses – Employee Levels Decreased by 0.8% (Y-O-Y Change – Average Salaries & Employees) % Change Y-O-Y 5% 0% -5% -10% Q3'09 Q4'09 Q1'10 Q2'10 Average Salaries Employees 18

  19. Slide 19: Fuel Cost Per Litre Up 8.7%

    Fuel Cost Per Litre Up 8.7% – Fuel Productivity Down 0.9% – Economic Cost of Fuel Per Litre Up 24% (Fuel Productivity & Cost per Litre) % Change Y-O-Y 10% 0% -10% -20% -30% -40% Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Fuel Productivity (# of litres/100 ASMs) Fuel Cost (Cdn cents/litre) 19

  20. Slide 20: Operating Expenses Up $107M

    Oper. Exp. Up $107M Largely on 5.3% Capacity Growth & Higher Fuel Prices – Partly Offset By Lower Acft. Mtce. Exp. % Change Y-O-Y 60% 50% 40% 30% 20% 10% 0% -10% -20% -30% r p Ba e. IT es . PA s hi i ss Mtc uel Fe &B & & zC ner mm Ms Ms F er m. od er ft. O th A/C J az SW Ow RP Co AS Co Us Fo Ac 20 Q

  21. Slide 21: Unit Cost Down 0.9% – Down 4.2% Excluding Fuel

    Unit Cost Down 0.9% – Down 4.2% Excluding Fuel Favourable FX Largest Contributing Factor % Change Y-O-Y 5% 0% -5% -10% -15% Q3'09 Q4'09 Q1'10 Q2'10 Cost per ASM Cost per ASM excluding fuel 21

  22. Slide 22: Further Information

    Further Information For further information on Air Canada's public disclosure file, including Air Canada's Second Quarter 2010 MD&A dated August 5, 2010 and Air Canada's Annual Information Form, consult Air Canada's website at aircanada.com or SEDAR at www.sedar.com 22

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