Air Canada 2007 Annual Report Download - page 52

2007 Air Canada Annual Report
52
The Relationship between Air Canada and ACTS
On October 16, 2007, ACE announced the completion of the monetization of ACTS LP pursuant to which ACTS LP sold
substantially all of its assets, liabilities and business to ACTS Aero. ACTS Aero conducts the business previously operated by
ACTS LP.
The ACTS Maintenance Agreements, the ACTS Master Services Agreement, the ACTS Trademark License Agreement, the
Repair Schemes and Non-Compete Agreement and the ACTS General Services Agreements, all between Air Canada and
ACTS LP and described below were assigned from ACTS LP to ACTS Aero upon closing of the monetization of ACTS. On
closing of the ACTS monetization, Air Canada recorded proceeds of $28 million for the sale of a building to ACTS Aero,
$17 million for the settlement of a intercompany note with ACTS, $20 million pursuant to the transfer of repair schemes
and as described below and the funding of a letter of credit in the amount of $101 million related to a “Pension and Benefi ts
Agreement” as described below. ACTS Aero is a related party to the Corporation due to ACE’s investment in both entities.
ACTS Maintenance Agreements
ACTS Aero and Air Canada are parties to a general terms and related services agreements effective October 1, 2006, pursuant
to which ACTS Aero provides technical services to Air Canada including engine and auxiliary power unit maintenance
services, aircraft heavy maintenance services (excluding line and cabin maintenance services which are provided by
Air Canada), component maintenance services, paint services, training services and ancillary services. ACTS Aero serves as
Air Canada’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. ACTS Aero serves as Air Canada’s
non-exclusive repair agency in respect of other services provided. Except for the services agreement relating to aircraft
heavy maintenance services which expires in October 2011 and the services agreement relating to paint services which
expires in October 2009, each of the agreements referred to above expires in October 2013.
ACTS Aero and Jazz are parties to a component maintenance agreement (the “ACTS-Jazz Agreement”) dated August 1, 2005,
pursuant to which ACTS Aero provides selected maintenance, repair, overhaul and related services with respect to Jazz’s CRJ
regional jets. Pursuant to the ACTS-Jazz Agreement, ACTS Aero serves as Jazz’s exclusive repair agency to provide component
repair and overhaul work on parts which can be removed from the aircraft in respect of CRJ-100/200 and common CRJ-705
parts not performed internally by Jazz employees. The initial term of the ACTS-Jazz Agreement expires in August 2015 and
it is renewable for three successive two-year periods. Jazz amounts with ACTS are not reported for the period after Jazz’s
deconsolidation on May 24, 2007.
ACTS Master Services Agreement (ACTS MSA)
ACTS Aero and Air Canada are parties to an amended and restated master services agreement (the “ACTS MSA”), effective
January 1, 2007, pursuant to which Air Canada provides ACTS Aero with services including infrastructure support and services
which are mostly administrative in nature, including information technology, human resources, fi nance and accounting, and
claims services in return for fees paid by ACTS Aero to Air Canada. ACTS Aero may elect to terminate any services under
the ACTS MSA or the entire ACTS MSA upon six months’ prior written notice, with the exception of services relating to
information technology which ACTS Aero cannot terminate prior to the expiry of the ACTS MSA. Air Canada may elect to
terminate any services under the ACTS MSA or the entire ACTS MSA upon 18 months’ prior written notice.
ACTS Trademark License Agreement
ACTS Aero and Air Canada are parties to a trademark license agreement (the “ACTS Trademark License Agreement”), effective
September 30, 2004, pursuant to which Air Canada has granted ACTS Aero a royalty-free, non-exclusive, non-assignable
right to use certain Air Canada trademarks which incorporate the Air Canada name, and Air Canada’s roundel design, solely
in association with the provision of heavy maintenance, component maintenance and supply chain business services in
Canada and the United States. The ACTS Trademark License Agreement was amended on closing of the monetization of
ACTS LP to provide for the termination of the agreement on October 16, 2008.
ACTS General Services Agreements
ACTS Aero and Air Canada are parties to an amended and restated general services agreement (the “ACTS GSA”), effective
as of June 22, 2007 pursuant to which Air Canada provides ACTS Aero with the services of a group of unionized employees
for which Air Canada is reimbursed by ACTS Aero for all costs, including salary and benefi ts, on a fully allocated basis.
Non-unionized employees, previously assigned to ACTS under another general services agreement, were transferred to ACTS
on October 16, 2007. The ACTS GSA may be terminated by either party at any time upon 30 days’ prior written notice.