Air Canada 2010 Annual Report Download - page 138

2010 Air Canada Annual Report
138
In the first quarter of 2010, Air Canada filed legal proceedings with the Federal Court of Canada seeking to challenge the
process announced by the TPA to allocate flight capacity or slots at the TCCA. On July 21, 2010, the Federal Court of Canada
dismissed Air Canada’s challenge and Air Canada is appealing this decision before the Federal Court of Appeal.
Pay Equity
The Canadian Union of Public Employees (“CUPE”), which represents Air Canada’s flight attendants, filed 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 Air Canada for investigation
and an investigation is proceeding. Air Canada 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.
Mandatory Retirement
Air Canada is engaged in a number of proceedings involving challenges to the mandatory retirement provisions of certain
of its collective agreements, including the Air Canada-Air Canada Pilots Association collective agreement which incorporate
provisions of the pension plan terms and conditions applicable to pilots requiring them to retire at age 60. Air Canada
is defending these challenges. At this time, it is not possible to determine with any degree of certainty the extent of any
financial liability that may arise from Air Canada being unsuccessful in its defense of these proceedings, though any such
financial liability, if imposed, would not be expected to be material.
Other Contingencies
Various other lawsuits and claims, including claims filed by various labour groups of Air Canada are pending by and against the
Corporation and provisions have been recorded where appropriate. It is the opinion of management that final determination
of these claims will not have a material adverse effect on the financial position or the results of the Corporation.
With respect to 44 aircraft leases, the difference between the reduced rents as a result of the implementation of the
Plan of Reorganization, Compromise and Arrangement under the Companies’ Creditors Arrangement Act (“CCAA”) on
September 30, 2004 and amounts which would have been due under the original lease contracts will be forgiven at the
expiry date of the leases if no material default has occurred by such date. In the event of a material default which does not
include any cross defaults to other unrelated agreements (including unrelated agreements with the counterparties to these
aircraft leases), this difference plus interest will become due and payable and all future rent will be based on the original
contracted rates. Rent expense is being recorded on the renegotiated lease agreements and any additional liability would
be recorded only at the time management believes the amount is likely to be incurred.
Guarantees
Guarantees in Fuel Facilities Arrangements
The Corporation participates in fuel facility arrangements operated through Fuel Facility Corporations, along with other
airlines that contract for fuel services at various major airports in Canada. The Fuel Facility Corporations operate on a cost
recovery basis. The purpose of the Fuel Facility Corporations is to own and finance the system that distributes the fuel to
the contracting airlines, including leasing the Land Rights under the land lease. The aggregate debt of the five Fuel Facility
Corporations in Canada that have not been consolidated by the Corporation under AcG-15 is approximately $171 as at
December 31, 2010 (2009 - $162), which is the Corporation’s maximum exposure to loss without taking into consideration
any cost sharing that would occur amongst the other contracting airlines. The Corporation views this loss potential as
remote. Each contracting airline participating in a Fuel Facility Corporation shares pro rata, based on system usage, in the
guarantee of this debt.