Air Canada 2007 Annual Report Download - page 88

2007 Air Canada Annual Report
88
F) AEROPLAN LOYALTY PROGRAM
Air Canada is an Aeroplan partner providing certain of Air Canada’s customers with Aeroplan Miles, which can be redeemed
by customers for air travel or other rewards acquired by Aeroplan.
Under the Commercial Participation and Services Agreement (“CPSA”) between the Corporation and Aeroplan, Aeroplan
purchases passenger tickets from Air Canada to meet its obligation for the redemption of Aeroplan Miles for air travel.
The proceeds from the sale of passenger tickets to Aeroplan are included in Advance ticket sales. Revenue related to these
passenger tickets is recorded in passenger revenues when transportation is provided.
For Aeroplan Miles earned by Air Canada customers, Air Canada purchases Miles from Aeroplan in accordance with the terms
of the CPSA. The cost of purchasing Aeroplan Miles from Aeroplan is accounted for as a sales incentive and charged against
passenger revenues when the points are issued, which is upon the qualifying air travel being provided to the customer.
Under the CPSA, for a specifi ed number of Aeroplan Miles issued prior to January 1, 2002, the Corporation is responsible
for providing air travel rewards at no charge to Aeroplan. Upon implementation of the Corporation’s plan of arrangement
under the Companies’ Creditors Arrangement Act (the “Plan”), this obligation was recorded at the estimated fair value of
air travel rewards expected to be issued to the Aeroplan members and was adjusted in 2006 (Note 22). On redemption of
these Aeroplan Miles, a proportion of the liability is transferred to Advance ticket sales with revenue recorded in passenger
revenues when the transportation is provided.
G) OTHER REVENUES
Other revenue includes revenues from the sale of the ground portion of vacation packages, ground handling services and
other airline related services. Vacation package revenue is recognized as services are provided over the period of the vacation.
Other airline related service revenues are recognized as the products are sold to passengers or the services are provided.
Other revenue also includes revenue related to the lease or sublease of aircraft to third parties. Lease or sublease revenues
are recognized on a straight line basis over the term of the lease or sublease.
The Corporation provides certain services to related parties consisting principally of administrative services in relation
to information technology, human resources, fi nance and accounting, treasury and tax services, corporate real estate,
environmental affairs and legal services. Administrative service revenues are recognized as services are provided. Real estate
rental revenues are recognized on a straight line basis over the term of the lease.
H) EMPLOYEE FUTURE BENEFITS
The cost of pensions, other post-retirement and post-employment benefi ts earned by employees is actuarially determined
using the projected benefi t method prorated on service, market interest rates, and management’s best estimate of expected
plan investment performance, salary escalation, retirement ages of employees and expected health care costs.
A market-related valuation method is used to value plan assets for the purpose of calculating the expected return on plan
assets. Under the selected method, the differences between investment returns during a given year and the expected
investment returns are amortized on a straight line basis over 4 years.
Past service costs arising from plan amendments are amortized on a straight-line basis over the average remaining service
period of employees active at the date of amendment. This period does not exceed the average remaining service period of
such employees up to the full eligibility date. The average remaining service life of active employees (or average remaining
life expectancy of former members for plan with no active members) is between 7 and 16 years for pension plans and
between 10 and 11 years for post retirement and post employment benefi t plans.
Cumulative unrecognized net actuarial gains and losses in excess of 10% of the greater of the projected benefi t obligation or market-
related value of plan assets at the beginning of the year are amortized over the remaining service life of active employees.