Air Canada 2012 Annual Report Download - page 72

2012 Air Canada Annual Report
72
For instance, a key component of Air Canada’s business plan is the acquisition of new and more efficient Boeing 787 aircraft. A
delay or failure in the completion of Air Canada’s fleet restructuring, including further delays by the manufacturers in the
delivery of the widebody aircraft, or an inability to remove, as planned, certain aircraft from the fleet in coordination with the
planned entry into service of new aircraft, could adversely affect the implementation of Air Canada’s business plan which may,
in turn, have a material adverse effect on Air Canada, its business, results from operations and financial condition.
Airport User Fees and Air Navigation Fees
With the privatization of airports and air navigation authorities in Canada, airport and air navigation authorities have
significantly increased their fees. Though certain authorities have implemented some fee reductions, if authorities in Canada
or elsewhere were to significantly increase their fees, Air Canada, its business, results from operations and financial condition
could be materially adversely affected.
Dependence on Technology
Air Canada relies heavily on technology, including computer and telecommunications equipment and software and internet-
based systems, to operate its business, increase its revenues and reduce its costs. These systems include those relating to Air
Canada’s telecommunications, websites, computerized airline reservations and airport customer services and flight operations.
These technology systems may be vulnerable to a variety of sources of failure, interruption or misuse, including by reason of
third party suppliers’ acts or omissions, natural disasters, terrorist attacks, telecommunications failures, power failures,
computer viruses, unauthorized or fraudulent users, and other operational and security issues. While Air Canada continues to
invest in initiatives, including security initiatives and disaster recovery plans, these measures may not be adequate or
implemented properly. Any such technology systems failure, interruption or misuse, whether at Air Canada or a third party on
whom Air Canada relies, could materially and adversely affect Air Canada’s operations and could have a material adverse
effect on Air Canada, its business, results from operations and financial condition.
Key Supplies and Suppliers
Air Canada is dependent upon its ability to source, on favourable terms and costs, sufficient quantities of goods and services in
a timely manner, including those available at airports or from airport authorities or otherwise required for Air Canada’s
operations such as fuel, aircraft and related parts and aircraft maintenance services. In certain cases, Air Canada may only be
able to access goods and services from a limited number of suppliers and transition to new suppliers (including aircraft
maintenance service providers to whom Air Canada transitioned following Aveos’ closure) may take a significant amount of
time and require significant resources. A failure, refusal or inability of a supplier may arise as a result of a wide range of causes,
many of which are beyond Air Canada’s control. In addition, there can be no assurance as to the continued viability of any of
Air Canada’s suppliers. Any failure or inability of Air Canada to successfully source goods and services, including by reason of a
failure, refusal or inability of a supplier, or to source goods and services on terms and pricing and within the timeframes
acceptable to Air Canada, could have a material adverse effect on Air Canada, its business, results from operations and
financial condition.
Aeroplan®
Through its commercial agreement with Aeroplan, Air Canada is able to offer its customers who are Aeroplan® members the
opportunity to earn Aeroplan® Miles. Based on customer surveys, management believes that rewarding customers with
Aeroplan® Miles is a significant factor in customers’ decision to travel with Air Canada and contributes to building customer
loyalty. The failure by Aeroplan to adequately fulfill its obligations towards Air Canada under the Aeroplan Commercial
Participation and Services Agreement and in connection with the Aeroplan program, or other unexpected interruptions or
disruptions of Aeroplan services which are beyond Air Canada’s control, could have a material adverse effect on Air Canada, its
business, results from operations and financial condition.
Regional Carriers
Air Canada seeks to enhance its network through capacity purchase agreements, including the Jazz CPA and other capacity
purchase agreements with regional airlines, such as Sky Regional, operating flights on behalf of Air Canada.