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2009 Air Canada Annual Report
54
15. RELATED PARTY TRANSACTIONS
At December 31, 2009, ACE Aviation Holdings Inc. (“ACE”) held a 27% ownership interest in Air Canada. Air Canada has
various related party transactions with Aveos Fleet Performance Inc. (“Aveos”) and ACE.
Summary of Signifi cant Related Party Agreements
The Relationship between the Corporation and Aveos
Refer to the “Aveos Restructuring Plan” section below for a description of a restructuring plan announced by Aveos on
January 26, 2010. Closing of Aveos’ restructuring transactions is expected to occur during the fi rst quarter of 2010 and is
dependant on completion of formal documentation and certain conditions. This restructuring would modify the terms of
certain commercial agreements between Air Canada and Aveos, including terms of the Pension and Benefi ts Agreement and
the Agreement with Aveos on Revised payment terms described below.
Pension and Benefi ts Agreement
The Corporation, ACTS and Aveos entered into a Pension and Benefi ts Agreement effective as of October 16, 2007,
as amended (“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 and who became employees
of Aveos on October 16, 2007 and (ii) those 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 (i.e. Aveos) in 2007). Under the Pension and Benefi ts
Agreement, Aveos is required to establish 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) (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 are to be transferred
to Aveos 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 Aveos 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 are to be
paid by Air Canada through quarterly payments to Aveos 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 are to be transferred to Aveos, the current service pension cost and
the current service and interest costs for other employee benefi ts are expensed by Air Canada with a full offset recorded as
an amount charged to affi liates (Aveos).
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 commence employment with Aveos pursuant to the Transition Memorandum of Agreement
(“the Transition MOA”), as described further below. 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 will be made quarterly during the fi ve years beginning after the unionized employees
are transferred to Aveos, 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 Aveos, 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 Aveos are charged by Air Canada to Aveos.