Air Canada 2006 Annual Report Download - page 58

efficient aircraft. A delay or failure in the completion of the Corporation's fleet restructuring, including a delay by
the manufacturers in the delivery of the regional jet or wide-body aircraft, or an inability to remove, as planned,
certain aircraft from the fleet in coordination with the planned entry into service of new aircraft, could adversely
affect the implementation of the Corporation's business plan which may, in turn, have a material adverse effect
on the Corporation's business, results from operations and financial condition.
Another important component of the Corporation’s business plan is the replacement of its legacy systems for
passenger reservation and airport customer service with a newly developed web-enabled system in order to
support the rapid and efficient implementation of the Corporation's revenue model. The new system is
expected to be deployed in phases from late 2007 to early 2008. A delay or failure in the implementation of the
Corporation's new system could adversely affect the implementation of the Corporation's business plan which
may, in turn, have a material adverse effect on the Corporation's business, results from operations and financial
condition.
Dependence on Technology
The Corporation relies on technology, including computer and telecommunications equipment and software and
Internet-based systems, to operate its business, increase its revenues and reduce its costs. These systems
include those relating to the Corporation’s telecommunications, websites, computerized airline reservations and
airport customer services and flight operations.
These technology systems may be vulnerable to a variety of sources of failure, interruption or misuse, including
by reason of natural disasters, terrorist attacks, telecommunications failures, power failures, computer viruses,
hackers, unauthorized or fraudulent users, and other operational and security issues. While the Corporation
continues to invest in initiatives, including security initiatives and disaster recovery plans, these measures may
not be adequate or implemented properly. Any such technology systems failure could materially and adversely
affect the Corporation's operations and could have a material adverse effect on the Corporation's business,
results from operations and financial condition.
Key Supplies and Suppliers
The Corporation is dependent upon its ability to source, on favourable terms and costs, sufficient quantities of
goods and services in a timely manner, including those required for the Corporation’s operations such as fuel,
aircraft and related parts and aircraft and engine maintenance services (including maintenance services
obtained from ACTS). In certain cases, such goods and services may only be available from a limited number of
suppliers. Such failure, refusal or inability may arise as a result of a wide range of causes, many of which are
beyond the Corporation's control. Any failure or inability of the Corporation to successfully source goods and
services, including by reason of a failure, refusal or inability of a supplier, or to source goods and services on
terms and pricing and within the timeframes acceptable to the Corporation, could have a material adverse effect
on the Corporation's business, results from operations and financial condition.
Aeroplan
Through its relationship with Aeroplan, the Corporation is able to offer its customers who are Aeroplan members
the opportunity to earn Aeroplan miles. Based on customer surveys, Management believes that rewarding
customers with Aeroplan miles is a significant factor in customers' decision to travel with Air Canada and Jazz
and contributes to building customer loyalty. The failure by Aeroplan to adequately fulfill its obligations towards
the Corporation under the Aeroplan CPSA and in connection with the Aeroplan program, or other unexpected
interruptions of Aeroplan services which are beyond the Corporation's control could have a material adverse
effect on the Corporation's business, results from operations and financial condition.
Jazz
Under the Jazz CPA, Jazz provides the Corporation's customers service in lower density markets and higher
density markets at off-peak times throughout Canada and to and from certain destinations in the United States
and also provides valuable traffic feed to the Corporation's mainline routes. The Corporation reimburses Jazz,
without mark-up, for certain pass-through costs incurred directly by Jazz, such as fuel, navigation, landing and
terminal fees and certain other costs. Significant increases in such pass-through costs, the failure by Jazz to
adequately fulfill its obligations towards the Corporation under the Jazz CPA, or other unexpected interruptions
of Jazz's services which are beyond the Corporation's control could have a material adverse effect on the
Corporation's business, results from operations and financial condition. In addition, the Jazz CPA requires that
Jazz maintain a minimum fleet size and contains a minimum average daily utilization guarantee which requires
that the Corporation make certain minimum payments to Jazz regardless of the revenue generated by Jazz.
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