Air Canada 2010 Annual Report Download - page 137

Consolidated Financial Statements and Notes
137
17. CONTINGENCIES, GUARANTEES AND INDEMNITIES
Contingencies
Investigations by Competition Authorities Relating to Cargo
The European Commission, the United States Department of Justice and the Competition Bureau in Canada have investigated
or are investigating alleged anti-competitive cargo pricing activities, including the levying of certain fuel surcharges, of a
number of airlines and cargo operators, including Air Canada. Competition authorities have sought or requested information
from Air Canada as part of their investigations. Air Canada has been cooperating with these investigations, which are
likely to lead, or have led, to proceedings against Air Canada and a number of airlines and other cargo operators in certain
jurisdictions. Air Canada is 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. Air Canada has been or may be named as
a defendant or may otherwise be implicated in these or other lawsuits or proceedings in connection with these allegations.
During 2008, Air Canada recorded a provision of $125 as a preliminary estimate. This was only an estimate based upon
the status of the investigations and proceedings at that time and Air Canada’s assessment as to the potential outcome for
certain of them. This provision did not address the proceedings and investigations in all jurisdictions, but only where there
was sufficient information to do so. On November 9, 2010, Air Canada announced that the European Commission issued a
decision finding that 12 air cargo carriers (including groups of related carriers) had infringed European Union competition
law in the setting of certain cargo charges and rates for various periods between 1999 and 2006. Air Canada was among the
carriers subject to the decision and a fine of 21 Euros (approximately C$29 at an exchange rate of $1.3970) was imposed on
Air Canada. The amount of the fine is covered by the $125 provision taken by Air Canada in 2008. Air Canada is appealing
this decision and filed an application for annulment of the decision before the European General Court. In the first quarter
of 2011, Air Canada will pay the fine, as required, pending the outcome of the appeal.
As a result of the decision by the European Commission and a further review of proceedings and investigations in other
jurisdictions, Air Canada recorded a net reduction to the provision for cargo investigations of $46 in 2010. The revised
provision does not address the proceedings and investigations in all jurisdictions, but only where there is sufficient
information to do so. Air Canada has determined it is not possible at this time to predict with any degree of certainty the
outcome of all proceedings and investigations. As stated above, Air Canada is appealing the decision issued by the European
Commission and, if and as appropriate, based on the outcome of any updates regarding this appeal as well as developments
regarding proceedings and investigations in other jurisdictions, may adjust the provision in its results for subsequent periods
as required.
Billy Bishop Toronto City Airport
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 Billy Bishop Toronto City Airport. 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 in damages. On October 16, 2009, Jazz discontinued
its suit in the Ontario Superior Court against Porter.
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 Billy Bishop Toronto
City Airport. The Porter Defendants were granted intervenor 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. In March 2010, Jazz discontinued its proceedings in the Federal Court
of Canada against the TPA. On May 14, 2010, Porter filed a discontinuance of its counterclaim before the Federal Court of
Canada.
The counterclaim filed by Porter in the Ontario Superior Court of Justice against Jazz and Air Canada was stayed pending
the outcome of the mirror counterclaim in the Federal Court but in January 2011 Porter filed proceedings to have the stay
lifted to reactivate the counterclaim. Management views Porter’s counterclaim as being without merit.