Air Canada 2008 Annual Report Download - page 78

2008 Air Canada Annual Report
78
Interruptions or Disruptions in Service
The Corporation’s business is significantly dependent upon its ability to operate without interruption at a number of hub
airports, including Toronto Pearson International Airport. Delays or disruptions in service, including those due to security or
other incidents, weather conditions, labour conflicts with airport workers, baggage handlers, air traffic controllers and other
workers not employed by the Corporation or other causes beyond the control of the Corporation could have a material adverse
impact on the Corporation’s business, results from operations and financial condition.
Current Legal Proceedings
The European Commission, the United States Department of Justice and the Competition Bureau in Canada, among other
competition authorities, are investigating alleged anti-competitive cargo pricing activities, including the levying of certain
fuel surcharges, of a number of airlines and cargo operators, including the Corporation. Competition authorities have sought
or requested information from the Corporation as part of their investigations. The Corporation is cooperating with these
investigations, which are likely to lead, or have led, to proceedings against the Corporation and a number of airlines and other
cargo operators in certain jurisdictions including in the European Union where all formal procedural steps preceding a decision
have been completed. The Corporation is also named as a defendant in a number of class action lawsuits that have been filed
before the United States District Court and in Canada in connection with these allegations.
During 2008, the Corporation recorded a provision of $125 million as a preliminary estimate. This estimate is based upon
the current status of the investigations and proceedings and the Corporation’s assessment as to the potential outcome for
certain of them. This provision does not address the proceedings and investigations in all jurisdictions, but only where there
is sufficient information to do so. Management has determined it is not possible at this time to predict with any degree of
certainty the outcome of all proceedings and investigations. Additional material provisions may be required.
In February 2006, Jazz commenced proceedings before the Ontario Superior Court of Justice against Porter Airlines Inc. (“Porter”)
and other defendants (collectively the “Porter Defendants”) after Jazz became aware that it would be excluded from operating
flights from Toronto City Centre (Island) Airport (the “TCCA”). On October 26, 2007, the Porter Defendants counter-claimed
against Jazz and Air Canada alleging various violations of competition law, including that Jazz and Air Canada’s commercial
relationship contravenes Canadian competition laws, and claiming $850 million in damages. Concurrently with the Ontario
Superior Court of Justice proceedings, Jazz commenced judicial review proceedings against the Toronto Port Authority (”TPA”)
before the Federal Court of Canada relating to Jazz’s access to the TCCA. The Porter Defendants were granted intervener and
party status in these proceedings. In January of 2008, Porter filed a defence and counterclaim against Jazz and Air Canada
making allegations and seeking conclusions similar to those in the Ontario Superior Court counterclaim. Management views
Porter’s counterclaims in both jurisdictions as being without merit.
The Canadian Union of Public Employees (“CUPE”), which represents the Corporation’s flight attendants, has a complaint before
the Canadian Human Rights Commission where it alleges gender-based wage discrimination. CUPE claims the predominantly
female flight attendant group should be paid the same as the predominantly male pilot and mechanics groups because their
work is of equal value. The complaint dates from 1991 but has not been investigated on the merits because of a legal dispute
over whether the three groups work in the same “establishment” within the meaning of the Canadian Human Rights Act. On
January 26, 2006, the Supreme Court of Canada ruled that they do work in the same “establishment” and sent the case back
to the Canadian Human Rights Commission, which may now proceed to assess the merits of CUPE’s complaint. On March
16, 2007, the Canadian Human Rights Commission referred the complaint against the Corporation for investigation. The
Corporation considers that any investigation will show that it is complying with the equal pay provisions of the Canadian
Human Rights Act, however, management has determined that it is not possible at this time to predict with any degree of
certainty the final outcome of the Commission’s investigation.
Future Legal proceedings
Airlines are susceptible to various claims and litigation in the course of operating their business. Future litigation, including
an increase in class action claims, could also have a material adverse effect on the Corporation’s business and results from
operations.
Key Personnel
The Corporation is dependent on the experience and industry knowledge of its executive officers and other key employees
to execute its business plan. If Air Canada were to experience a substantial turnover in its leadership or other key employees,
Air Canada’s business, results from operations and financial condition could be materially adversely affected. Additionally, Air
Canada may be unable to attract and retain additional qualified key personnel as needed in the future.