Air Canada 2006 Annual Report Download - page 46

13. RELATED PARTY TRANSACTIONS
The Corporation has various related party transactions with ACE (the principal shareholder with a 75 percent
ownership interest in Air Canada at December 31, 2006 and a 79.7 percent ownership interest in Jazz, both at
December 31, 2006) and with other entities under common control, including ACTS and Aeroplan. These
transactions are recorded at the exchange amount.
Air Canada provides certain administrative services to ACE in return for a fee. Such services relate to finance
and accounting, information technology, human resources and other administrative services.
Pursuant to the Jazz CPA effective January 1, 2006, Air Canada Services purchases substantially all of Jazz’s
fleet capacity based on predetermined rates, in addition to reimbursing Jazz, without mark-up, for certain pass-
through costs as defined in the Jazz CPA. The capacity purchase fees paid to Jazz and the pass-through costs
reimbursed to Jazz by Air Canada Services are eliminated within Air Canada’s combined consolidated financial
statements and are therefore not reflected in the table below.
Related party trade balances relate mainly to the provision of services, the allocation of employee-related costs,
the allocation of corporate expenses and centralized cash management activities.
Refer to Notes 1, 6, 7 and 9 to Air Canada’s combined consolidated financial statements for additional
information.
Commercial Agreements – Aeroplan
Aeroplan is a subsidiary of ACE in which ACE has a 75.3 percent interest at December 31, 2006 (50.3 percent
interest after January 10, 2006). Aeroplan operates a loyalty program which provides loyalty marketing services
to its customers.
Pursuant to the Aeroplan Commercial Participation and Services Agreement (“CPSA”), Air Canada allocates
fixed seat capacity to Aeroplan on Air Canada Flights. The rates charged for such seat capacity are fixed
through the end of 2007. Air Canada pays a fee to participate in the Aeroplan Program, which fee is based on
the Aeroplan Miles awarded to Air Canada customers who travel on Air Canada Flights. Aeroplan is required to
purchase annually a minimum number of reward travel seats on Air Canada Flights, which number is a function
of Aeroplan's consumption of seats in the three preceding calendar years. Moreover, Air Canada is required to
purchase a minimum number of Aeroplan miles annually (2006 — $170 million).
Pursuant to the Aeroplan Master Services Agreement (“MSA”), Air Canada has agreed to provide certain
services to Aeroplan (such as infrastructure support, information technology, human resources, finance,
accounting and legal services) in return for a fee based on Air Canada's fully allocated cost of providing such
services to Aeroplan plus a mark-up to reflect overhead and administrative costs.
Pursuant to the Aeroplan General Services Agreement (“GSA”), Air Canada provides Aeroplan with the services
of a group of call centre employees of Air Canada for which is reimbursed by Aeroplan for all costs, including
salary and benefits, on a fully allocated basis.
Commercial Agreements – ACTS
ACTS is a wholly owned subsidiary of ACE that provides full-service maintenance, repair and overhaul services
to a wide range of customers, including to Jazz and Air Canada.
Pursuant to various service agreements between ACTS and Air Canada effective as of October 1, 2006,
ACTS provides the following services to Air Canada with respect to certain of Air Canada's aircraft,
engines and other aircraft equipment: aircraft heavy maintenance services (excluding line and cabin
maintenance services which are primarily provided by Air Canada), engine maintenance services,
component maintenance services, supply chain and asset management services, auxiliary power unit
maintenance services, aircraft paint services and related services. ACTS serves as Air Canada's
exclusive repair agency in respect of aircraft heavy maintenance, engine maintenance, auxiliary power
unit maintenance services as well as for maintenance services relating to certain components. ACTS
serves as Air Canada's non-exclusive repair agency in respect of other services provided. Except for the
services agreements relating to aircraft heavy maintenance and paint services which expire in October
2009, each of the agreements referred to above expires in October 2013.
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