Air Canada 2007 Annual Report Download - page 139

Consolidated Financial Statements and Notes
139
20. SALE OF ACTS
On October 16, 2007, ACE announced the completion of the sale of ACTS LP, its wholly owned maintenance, repair and
overhaul subsidiary, pursuant to which ACTS LP sold substantially all its assets, liabilities and business to ACTS Aero, a new
entity established to purchase the assets of ACTS LP, with ACE retaining a 23% interest in ACTS Aero.
On closing of the ACTS Sale, the following transactions were recorded by Air Canada:
■ Proceeds of $28 for the sale of a building to ACTS Aero (refer to Note 4).
■ Proceeds of $17 for the settlement of a related party receivable with ACTS.
■ Proceeds of $20 pursuant to the Repair Schemes and Non-Compete Agreement described below
■ The funding of a letter of credit in the amount of $101 related to the “Pension and Benefi ts Agreement” as described
below.
The ACTS Maintenance Agreements, the ACTS Master Services Agreement, the ACTS Trademark License Agreement, and the
General Services Agreements, all between Air Canada and ACTS and as described in Note 19, and the Repair Schemes and
Non-Compete Agreement described below were assigned from ACTS to ACTS Aero upon closing of the ACTS Sale.
Pension and Benefi ts Agreement
The Corporation, ACTS and ACTS Aero entered into a Pension and Benefi ts Agreement effective as of October 16, 2007
(“Pension and Benefi ts Agreement”), relating to pension and benefi ts arrangements pertaining to (i) the non-unionized
employees of Air Canada who were previously assigned to the ACTS operation became employees of ACTS Aero on October
16, 2007 and (ii) unionized employees of Air Canada who were assigned to ACTS Aero operation pursuant to general services
agreements between Air Canada and ACTS for the assignment of unionized employees from Air Canada to ACTS (these
agreements were assigned to ACTS Aero upon closing of the ACTS Sale). New defi ned benefi t and defi ned contribution
pension plans as well as other employee and retiree benefi t arrangements (including health, life and disability) are being
established by ACTS Aero (the “ACTS Benefi t Arrangements”).
Upon receipt of regulatory approval where required and based upon valuations of the relevant pension and benefi t
arrangements of Air Canada (the “Air Canada Benefi t Arrangements”) as at October 16, 2007, the assets and obligations
under the Air Canada Benefi t Arrangements pertaining to the transferring non-unionized employees will be transferred to
ACTS Aero or the ACTS Benefi t Arrangements, as applicable. Amounts with a present value equal to the solvency defi ciency
in the defi ned benefi t pension plans as at October 16, 2007 related to transferring non-unionized employees will be paid
by Air Canada through quarterly payments to ACTS Aero until 2014. Amounts with a present value equal to the accounting
liability as at October 16, 2007 in respect of retiree and disability benefi ts related to transferring non-unionized employees
will be paid by Air Canada through quarterly payments to ACTS Aero until 2012. The present value of these quarterly
payments is also referred to as the compensation amount. Until such future time as the assets and obligations under the
Air Canada Benefi t Arrangements pertaining to non-unionized employees may be transferred to ACTS Aero, the current
service pension cost and the current service and interest costs for other employee benefi ts will be expensed by Air Canada
with a full offset recorded as an amount charged to affi liates (ACTS Aero).
In addition, the Pension and Benefi ts Agreement contemplates similar asset and liability transfer and compensation
arrangements in respect of unionized employees, which arrangements would take effect at such future time as those
unionized employees may be transferred from Air Canada to ACTS Aero. However, the solvency defi ciencies in respect of
transferring unionized employees for which the future quarterly compensation payments would be made are determined as
at October 16, 2007, subject to certain adjustments, and the discount rate used to compute the accounting liability for the
unionized employees’ retiree and disability benefi ts is fi xed as at October 16, 2007. The compensation payments in respect
of these solvency defi ciencies and accounting liabilities would be made quarterly during the fi ve years beginning after the
unionized employees are transferred to ACTS Aero, but only if such a transfer occurs. Until such future time as the assets
and obligations under the Air Canada Benefi t Arrangement pertaining to unionized employees may be transferred to ACTS
Aero, the current service pension cost and the current service and interest costs for other employee benefi ts in respect of
Air Canada employees providing services to ACTS Aero are charged to ACTS Aero.