Air Canada 2009 Annual Report Download - page 141

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Consolidated Financial Statements and Notes
141
Aveos may call the letters of credit in whole or in part, in the event of a default as defi ned in the Pension and Benefi ts
Agreement. Collateral equal to the amount of the letters of credit was paid in cash with the asset recorded in Deposits and
other assets. Refer to Note 5 for the current amount of the letters of credit related to the Pension and Benefi ts Agreement.
Refer to the Aveos Restructuring Plan section below for a description of amendments which would be made to this
agreement pursuant to the restructuring.
During 2008, Air Canada, Aveos, and the union representing the employees assigned to Aveos continued discussions
regarding the options under which certain unionized employees would commence employment directly with Aveos and
the creation of a separate bargaining unit for those employees at Aveos. On January 8, 2009, these same parties entered
into the Transition MOA in order to resolve certain remaining issues and in order to (i) facilitate the orderly transition of
certain Air Canada employees to Aveos and (ii) to establish terms and conditions of employment that will apply to those
Air Canada employees who elect to become employees of Aveos. In relation to the Transition MOA, the Corporation and
Aveos also entered into certain ancillary agreements (the “Ancillary Transition Agreements”) to address commercial issues
relating to the transition of employees contemplated by the Transition MOA. On March 5, 2009, the Corporation received
the decision of the arbitrator seized with resolving fi ve issues which remained outstanding following the execution of the
Transition MOA. The Corporation and the IAMAW subsequently amended the Transition MOA, by establishing timelines for
the steps for the transition and by providing for a date on which the employees who will transition to Aveos will become
employees of Aveos, namely, April 1, 2011.
Non-Compete and Repair Schemes Transfer Agreement
Aveos and Air Canada are parties to a Non-Compete and Repair Schemes Transfer Agreement, effective as of October 16,
2007. Generally described, repair schemes are processes and methods which may be used in the maintenance and repair of
aircraft and related equipment. The Non-Compete and Repair Schemes Transfer Agreement confi rmed an arrangement and
provides for the sale from Air Canada to ACTS Aero (as successor to ACTS LP) of an undivided joint ownership interest in
repair schemes owned by Air Canada or approved under Air Canada’s airworthiness engineering organization as well as the
sale from Aveos to Air Canada of an undivided joint ownership interest in the repair schemes owned or developed by Aveos
and applicable to airframe heavy maintenance services provided by ACTS to Air Canada under the parties’ airframe heavy
maintenance services agreement. However, in September 2004 as part of the implementation of the Corporation’s plan of
arrangement under the Companies’ Creditors Arrangement Act, the Corporation had already granted ACTS full and exclusive
right to these schemes on a royalty free basis.
The Non-Compete and Repair Schemes Transfer Agreement also restricts Air Canada’s ability to own any equity interest
in an entity (other than entities in which Air Canada previously held interests), or to carry on a business activity, related
to the following commercial maintenance, repair and overhaul services in the airline industry, namely, airframe heavy
maintenance and paint services, engine and auxiliary power unit (“APU”) overhaul maintenance services, and component
maintenance services. The applicable non-compete periods are as follows:
• With respect to airframe heavy maintenance services and paint services, the non-compete period ends one year
after the current heavy maintenance services agreement is terminated or expires (the current term of the heavy
maintenance services agreement expires October 1, 2011);
• With respect to engine and APU overhaul maintenance services, the non-compete period ends on October 1, 2015;
and
• With respect to component maintenance services, the non-compete period ends on October 1, 2016;
The Non-Compete and Repair Schemes Transfer Agreement does not restrict Air Canada from holding interests in any
entities in which it held interests at the time of concluding the agreement nor does it limit Air Canada’s line maintenance
activities which it continues to operate.