Air Canada 2012 Annual Report Download - page 142

2012 Air Canada Annual Report
142
19. INVESTMENTS IN AVEOS
On March 18, 2012, Aveos Fleet Performance Inc. (“Aveos”) announced that it had ceased operating its airframe maintenance
facilities in Montreal, Winnipeg and Vancouver. On March 19, 2012, Aveos filed for court protection pursuant to the
Companies’ Creditors Arrangements Act (“CCAA”) and on March 20, 2012, issued a notice of termination to all of its employees.
As a result of the above, in 2012, Air Canada reduced the carrying value of its investment in Aveos Holding Company, Aveos’
parent company, as well as the carrying value of a long term note receivable from Aveos to nil and recorded an aggregate loss
on investments of $65. In addition, Air Canada recorded a liability of $55, which was charged to Discontinued Operations,
related to Air Canada’s commitment under a separation program. Refer to sections below for additional information on these
items.
Operating amounts owing between Air Canada and Aveos, including disputed invoices, may be subject to Aveos’ CCAA
proceedings and are being reported on a net basis. The ultimate settlement of such amounts may be dependent on resolution
by the court process. As such, certain balances recorded are based on a number of estimates and assumptions and it is not
possible to predict the outcome of the claims between the parties. Given the uncertainty as to the ultimate resolution,
additional provisions or charges may be required.
Discontinued Operations
On January 31, 2011, the Canada Industrial Relations Board issued an order (the “Order”) determining that the sale of Air
Canada’s former aircraft, engine and component maintenance and repair business had occurred within the meaning of the
Canada Labour Code, and establishing Aveos as a distinct employer, bound by separate collective agreements. The issuance of
the Order triggered the commencement of the process by which certain employees transitioned from Air Canada
to employment with Aveos effective July 14, 2011.
Pursuant to the Order and a related separation program, Air Canada had a commitment to provide, under certain conditions,
up to a maximum of 1,500 separation packages to IAMAW-represented Aveos employees employed as of the date of the
Order (with each package including up to a maximum of 52 weeks of pay). A liability of $55 related to the total cost in
relation to these separation packages has been recorded in Accounts payable and accrued liabilities and charged to
Discontinued Operations. For the year ended December 31, 2012, a cash outflow of $26 was generated in relation to this
separation program. It is expected that remaining payments to settle Air Canada’s commitment will be finalized in 2013.
Subsequent to Aveos’ CCAA filing, Aveos and Air Canada entered into agreements pursuant to which all agreements by which
Aveos was performing maintenance services for Air Canada airframes and other aircraft equipment were terminated.
Investments in Aveos
In 2010, Aveos reached an agreement with its lenders and equity holders on the terms of a consensual restructuring plan to
recapitalize the company. As part of this recapitalization, Air Canada and Aveos entered into agreements to settle certain
issues and modify the terms of certain contractual arrangements in exchange for Air Canada receiving a minority equity
interest in Aveos’ parent holding company and a Term Note with a face value of $22. As a result of these agreements, Air
Canada’s equity investment in Aveos was recorded at $49, based upon its estimated fair value, and $2 for legal fees. A Term
Note of $22 was recorded at its estimated fair value of $11, based on the present value of expected cash flows on a
discounted basis. Prior to Aveos filing for CCAA, the carrying value of the Term Note was $14.
As a result of Aveos’ CCAA filing, during the first quarter of 2012, the share investment and Term Note were adjusted to their
estimated fair value of nil with an aggregate charge of $65 recorded in Non-operating expense.