Air Canada 2007 Annual Report Download - page 138

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2007 Air Canada Annual Report
138
Loan and Prepayment Agreements between ACTS and Air Canada
Pursuant to a Prepayment Agreement dated October 26, 2006, Air Canada prepaid an amount of approximately
$595 to ACTS LP (the predecessor to ACTS LP and ACTS Aero) under the ACTS Maintenance Agreements for the
estimated equivalent of 12 months of service to be rendered by ACTS to Air Canada under the ACTS Maintenance
Agreements starting on November 1, 2006. The amount of such prepayment was immediately loaned back by ACTS
LP to Air Canada pursuant to a loan agreement dated October 26, 2006. Such loan was non-interest bearing and
repayable in instalments starting on November 1, 2006. The amount of the instalments was equal to the amount
that would otherwise have been payable by Air Canada under the ACTS Maintenance Agreements and became due
and payable on the day on which the amount became payable under the ACTS Maintenance Agreements. Repayment
of the entire amount of the loan was completed in 2007.
ACTS Aero and Air Canada are parties to a master lease agreement, effective as of October 1, 2006, pursuant to
which ACTS Aero leases space from the Corporation at the Vancouver, Winnipeg, Toronto and Montreal airports.
As described in Note 20, the non unionized employees were transferred to ACTS on October 16, 2007. Post
October 16, 2007, the non-unionized employees of ACTS are not covered under the GSA.
Cash Management System
Air Canada manages the cash for ACTS up to October 2007. All cash collected from billings and sources other than Air
Canada is recorded by Air Canada on a daily basis. Any payments to pay obligations related to operating and fi nancing
costs and capital expenditures other than obligations to the Corporation and other ACE affi liates were made through
the Air Canada cash management system. Inter-company accounts receivable and payable include any excess cash
(cash proceeds greater than cash expenditures), cash defi ciencies (cash expenditures greater than proceeds) or
deferrals of receipts of payments. The Consolidated statement of cash fl ows refl ects the receipt and repayment of
excess cash as a fi nancing activity and the disbursement and repayment of cash defi ciencies as investing activities.
The Relationship between the Corporation and ACE
Master Services Agreement
Air Canada provides certain administrative services to ACE in return for a fee. Such services relate to fi nance and
accounting, information technology, human resources and other administrative services.
Share Purchase Rights Sold by Air Canada to ACE
During 2007, Air Canada entered into an aircraft transaction with an unrelated third party whereby partial consideration
was paid to the Corporation in the form of the right to acquire shares of the unrelated third party. The Corporation
recorded the value of the share purchase rights at fair value of $1. The transaction related to the sale by the Corporation
of two Airbus A319 aircraft and the sublease by the Corporation of an additional two Airbus A319 aircraft, all of which
was completed in 2007 with the exception of one of the owned Airbus A319 aircraft, which was completed in 2008.
The Corporation sold the right to acquire the shares received from the unrelated third party to ACE, for proceeds
of $1.
Warrants purchased from ACE
On November 26, 2007, Air Canada purchased certain share warrants held by ACE for consideration of $4, which was
paid during the year and recorded as a decrease to contributed surplus. These warrants are for the purchase of shares
of an unrelated third party from which the Corporation purchases services. The equity of the unrelated third party is
not quoted in an active market and therefore fair value is not reliably measurable. As such, the fi nancial instrument
is recorded at cost, being the carrying amount in ACE of nil.
Purchase of Air Canada Vacations
During 2007, Air Canada purchased from ACE its 49% interest in Air Canada Vacations causing Air Canada Vacations
to be wholly owned by the Corporation. Consideration for the interest was $10. The consideration is accounted for on
the Consolidated statement of fi nancial position in contributed surplus. Air Canada Vacations remains consolidated
within the results of the Corporation.