Air Canada 2009 Annual Report Download - page 56

2009 Air Canada Annual Report
56
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.
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 Benefi ts Agreement, as described above, were cancelled. The
cancellation of the letters of credit provided cash to Air Canada of approximately $40 million and was offset by the impact
of extended payment terms to Aveos of $22 million, for a net cash fl ow benefi t of $18 million to the Corporation. The
extended payment terms to Aveos were originally scheduled to begin reducing in May 2009 with a corresponding return of
the letters of credit to Aveos.
As a result of amendments, the payment terms were extended. The extended payment terms to Aveos will be reduced
starting in February 2010, with the expiration of the extended terms to be completed over the following six months. By
July 2010, following expiration of the extended payment terms, the letters of credit would be reinstated to the levels
then required under the Pension and Benefi ts Agreement between the two parties. Refer to the “Aveos Restructuring Plan”
section below for a description of amendments which would be made to this agreement pursuant to the restructuring.
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)
and component maintenance. 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. 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. 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, fi nance and
accounting 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 table below summarizing related party revenues and expenses under “Revenues from corporate services
and other to ACE and Aveos”.
General Services Agreements
Aveos and Air Canada are parties to an amended and restated general services agreement (the “Aveos GSA”), effective as of
June 22, 2007, pursuant to which the Corporation provides Aveos with the services of a group of unionized employees for
which the Corporation is reimbursed by Aveos for all costs, including salary and benefi ts, on a fully allocated basis. The Aveos
GSA may be terminated by either party at any time upon 30 days’ prior written notice.
Real Estate Agreements
Aveos and Air Canada are parties to a master lease agreement, effective as of October 1, 2006, pursuant to which Aveos
leases space from the Corporation at the Vancouver, Winnipeg, Toronto and Montreal airports.