Air Canada 2008 Annual Report Download - page 148

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2008 Air Canada Annual Report
148
• WithrespecttoengineandAPUoverhaulmaintenanceservices,thenon-competeperiodendsonOctober1,2015;
and
• Withrespecttocomponentmaintenanceservices,thenon-competeperiodendsonOctober1,2016.
The Non-Compete and Repair Schemes Transfer Agreement does not restrict Air Canada from holding interests in any
entities in which it held interests at the time of concluding the agreement nor does it limit Air Canada’s line maintenance
activities which it continues to operate.
In consideration for the transfer of the repair schemes, Air Canada received $20. These proceeds were recorded in financing
activities on the Consolidated Statement of Cash Flows and a credit of $20 was recorded in Contributed surplus ($15 after
future income tax) as the transaction was recorded at the Corporation’s carrying amount of nil.
The Non-Compete and Repair Schemes Transfer Agreement was assigned to Aveos upon closing of the ACTS Sale.
Agreement with Aveos on Revised Payment Terms
Air Canada and Aveos entered into an agreement dated October 28, 2008 pursuant to which Air Canada has agreed to
temporarily extend payment terms to Aveos under certain related party agreements. In exchange for the extended payment
terms, certain letters of credit related to the Pension and Benefits Agreement, as described above, were canceled. The
cancellation of the letters of credit provided cash to Air Canada of approximately $40 and is offset by the impact of
extended payment terms to Aveos of $22, for a net cash flow benefit of $18 to the Corporation.
The extended payment terms to Aveos are reduced over the course of one year, with the first reduction starting approximately
six months from the date of the agreement, and with a corresponding return of the letters of credit to Aveos. By October
2009 the letters of credit would be re-instated to the levels then required under the Pension and Benefits Agreement
between the two parties.
Maintenance Agreements
Aveos and Air Canada are parties to a general terms and related services agreements effective October 1, 2006, pursuant to
which Aveos provides technical services to the Corporation including engine and auxiliary power unit maintenance services,
aircraft heavy maintenance services (excluding line and cabin maintenance services which are provided by the Corporation),
component maintenance services, paint services, training services and ancillary services. Aveos serves as the Corporation’s
exclusive repair agency in respect of aircraft heavy maintenance, engine maintenance, auxiliary power unit maintenance
services as well as for maintenance services relating to certain components. Aveos serves as the Corporation’s non-exclusive
repair agency in respect of other services provided. The services agreement relating to aircraft heavy maintenance services,
which expires in October 2011, will be extended to June 2013 conditional upon the issuance of an order of the Canada
Industrial Relations Board establishing that Aveos is a distinct employer, bound by separate collective agreements and
providing for the transition of employees from Air Canada to Aveos which are fully within the scope of the Transition
MOA and the Ancillary Transition Agreements mentioned above. The services agreement relating to engine maintenance
expires in October 2013, except in respect of certain engine types, for which the parties have agreed to extend the term
to December 31, 2018. The services agreement relating to paint services expires in October 2009 and each of the other
maintenance agreements referred to above expire in October 2013.
Master Services Agreement (MSA)
Aveos and Air Canada are parties to an amended and restated master services agreement (the “Aveos MSA”), effective January
1, 2007, pursuant to which the Corporation provides Aveos with services including infrastructure support and services which
are mostly administrative in nature, including information technology, human resources, finance and accounting, and claims
services in return for fees paid by Aveos to the Corporation. Aveos may elect to terminate any services under the Aveos
MSA or the entire Aveos MSA upon six months’ prior written notice, with the exception of services relating to information
technology which Aveos cannot terminate prior to the expiry of the Aveos MSA. Air Canada may elect to terminate any
services under the Aveos MSA or the entire Aveos MSA upon 18 months’ prior written notice. These amounts are recorded
in the above table summarizing related party revenues and expenses under Revenues from corporate services and other.