Air Canada 2006 Annual Report Download - page 60

Download and view the complete annual report

Please find page 60 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

Conversely, an opposite change in the exchange rate would have had the opposite effect on operating income.
The Corporation incurs significant expenses in U.S. dollars for such items as fuel, aircraft rental charges,
interest payments, debt servicing and computerized reservations system fees, while a substantial portion of its
revenues are generated in Canadian dollars. A significant deterioration of the Canadian dollar relative to the
U.S. dollar would increase the costs of the Corporation relative to its U.S. competitors and could have a material
adverse effect on the Corporation's business, results from operations and financial condition. In addition, the
Corporation may be unable to appropriately hedge the risks associated with fluctuations in exchange rates.
Current Legal Proceedings
The European Commission, the United States Department of Justice and the Competition Bureau in Canada,
among other competition authorities, are investigating alleged anti-competitive cargo pricing activities, including
the levying of certain fuel surcharges, of a number of airlines and cargo operators, including the Corporation.
Competition authorities have sought or requested information from the Corporation as part of their
investigations. The Corporation is cooperating fully with these investigations. The Corporation is also named
as a defendant in a number of class action lawsuits that have been filed before the United States District Court
and in Canada in connection with these allegations. It is not possible at this time to predict with any degree of
certainty the outcome of these proceedings. It is the Corporation's policy to conduct its business in full
compliance with all applicable competition laws.
In October 2006, ACPA commenced proceedings before the Ontario Superior Court of Justice against Air
Canada, ACE and certain members of the board of directors of Air Canada alleging that certain past and future
actions are oppressive to them. A variety of remedies were sought against the parties including an injunction to
impose, among other things, limits on corporate distributions including those contemplated under the ACE plan
of arrangement which became effective on October 10, 2006. Following a hearing in December, 2006, Mr.
Justice Cumming of the Ontario Superior Court of Justice dismissed ACPA's application for an injunction and
granted Air Canada's motion to dismiss ACPA's claim. ACPA has not appealed the dismissal of the injunction
application but has appealed the order dismissing its claim.
In addition, see above Risk Factor entitled “Equal Pay Litigation”.
Key Personnel
The Corporation is dependent on the experience and industry knowledge of its executive officers and other key
employees to execute its business plan. If Air Canada were to experience a substantial turnover in its
leadership or other key employees, Air Canada's business, results from operations and financial condition could
be materially adversely affected. Additionally, Air Canada may be unable to attract and retain additional
qualified key personnel as needed in the future.
60