Air Canada 2006 Annual Report Download - page 121

The transactions between Air Canada and Aeroplan described below are recorded at the exchange amount
and, commencing June 29, 2005, are settled by netting amounts payable against amounts receivable in
accordance with the inter-company agreements with any outstanding balance paid in the subsequent
period. Accordingly, as at December 31, 2006 and December 31, 2005, the amounts have been presented
on a net basis as the parties intend to settle on a net basis.
Aeroplan Commercial Participation and Services Agreement (CPSA)
Pursuant to the Aeroplan CPSA, Air Canada allocates fixed seat capacity to Aeroplan on Air Canada Flights
("AC Flights"). Such allocation of seat capacity consists of a total of 15% of the seat capacity on AC Flights,
8% of which is at a fixed redemption cost and the balance of 7% is at a higher fixed redemption cost. The
rates charged for such seat capacity are fixed through the end of 2007. Thereafter, any upwards or
downwards adjustments to such rates must maintain aggregate discounts at least as favourable to
Aeroplan as those set out in the current rates. These amounts are included in the above table summarizing
related party revenue and expenses under Revenues from Aeroplan related to Aeroplan Rewards.
Air Canada pays a fee to participate in the Aeroplan Program, which fee is based on the Aeroplan Miles
awarded to Air Canada customers who travel on AC Flights. Aeroplan is required to purchase annually a
minimum number of reward travel seats on AC Flights, which number is a function of Aeroplan's
consumption of seats in the three preceding calendar years. Moreover, Air Canada is required to purchase
a minimum number of Aeroplan Miles annually (2006 — $170). This fee is included in the above table
summarizing related party revenue and expenses under Revenue offset from purchase of Aeroplan Miles.
The Aeroplan CPSA also provides that Aeroplan shall, in return for a service fee, manage Air Canada's
frequent flyer tier membership program for Air Canada Super Elite(TM), Elite(TM) and Prestige(TM)
customers, as well as perform certain marketing and promotion services for Air Canada, including call
centre services for the frequent flyer tier membership program. These amounts are included in the above
table summarizing related party revenue and expenses under Call Centre management and marketing fees
from Aeroplan.
Unless otherwise agreed to between Air Canada and Aeroplan, all amounts due and owing by either party
to the other pursuant to the CPSA are payable within thirty days of the invoice date.
Aeroplan Database Agreement
Pursuant to the Aeroplan Database Agreement, Aeroplan manages Air Canada's passenger information
database. The Aeroplan Database Agreement allows Aeroplan to access and use the Air Canada database
information for statistical purposes, as well as for revenue generating and general marketing purposes by
using such information to conduct market research for other Aeroplan partners who are not in direct
competition with Air Canada. Air Canada is entitled to access and use the Aeroplan database information
for certain purposes, including pre-approved targeted marketing activities. The access and usage by each
of Aeroplan and Air Canada is subject to adherence with any applicable confidentiality and privacy
restrictions and is subject to pre-established fees based on the information access or use, which fees are
invoiced on a quarterly basis and are subject to revision annually.
Aeroplan Master Services Agreement (MSA)
Pursuant to the Aeroplan MSA, Air Canada has agreed to provide certain services to Aeroplan in return for
a fee based on Air Canada's fully allocated cost of providing such services to Aeroplan plus a mark-up to
reflect overhead and administrative costs. Pursuant to the Aeroplan MSA, Air Canada provides Aeroplan
with infrastructure support which is mostly administrative in nature, including information technology, human
resources, finance and accounting, and legal services. Amounts related to the MSA are included in the
above table summarizing related party revenues and expenses under Revenues from corporate services
and other.
Aeroplan General Services Agreement (GSA)
Pursuant to the Aeroplan GSA, Air Canada provides Aeroplan with the services of a group of call centre
employees of Air Canada. Aeroplan must reimburse Air Canada for all costs, including salary and benefits,
related to the call centre employees on a fully allocated basis. With regard to the shortfall in the pension
plan maintained by Air Canada which covers, among others, these call centre employees, Aeroplan has
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Combined Consolidated Financial Statements 2006