Air Canada 2006 Annual Report Download - page 125

Download and view the complete annual report

Please find page 125 of the 2006 Air Canada annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 128

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128

20. SPECIAL CHARGE FOR AEROPLAN MILES
In 2001, Air Canada established Aeroplan Limited Partnership as a limited partnership wholly owned by Air
Canada. The Aeroplan loyalty program was previously a division of Air Canada.
Under the Commercial Participation and Services Agreement (CPSA) between Air Canada and Aeroplan, Air
Canada retained responsibility for the 103 billion Miles to be redeemed from accumulations up to December 31,
2001. Aeroplan assumed responsibility for all Miles issued beginning January 1, 2002. On December 31, 2001,
there were 171 billion Miles outstanding of which, after considering breakage, management estimated that 103
billion Miles would be redeemed.
With the assistance of independent actuaries, management of Air Canada and Aeroplan re-estimated the
number of Miles expected to be redeemed from accumulations up to December 31, 2001. Management now
expects that 112 billion Miles will be redeemed compared to the original estimate of 103 billion. Pursuant to the
terms of the CPSA, dated June 9, 2004, as amended, the management of Air Canada and Aeroplan have
agreed to further amend the terms of the CPSA. Effective October 13, 2006, by amendment, Air Canada has
assumed responsibility for the redemption of up to 112 billion Miles and, as a result, recorded a special charge
of $102 for the incremental 9 billion Miles against Operating revenues in the year ended December 31, 2006
and increased Aeroplan deferred revenues. This amendment to the CPSA represents full and final settlement
with Aeroplan of Air Canada's obligations for the redemption of pre-2002 Miles. Aeroplan is responsible for any
redemption of Miles in excess of the re-estimated 112 billion Miles. The amount of the additional liability was
determined by valuing the incremental Miles at the current fair value.
125
Combined Consolidated Financial Statements 2006