Air Canada 2010 Annual Report Download - page 80

2010 Air Canada Annual Report
80
carriers subject to the decision and a fine of 21,037,500 Euros (approximately $29.4 million at an exchange rate of $1.3970)
was imposed on Air Canada. The amount of the fine was included in the $125 million provision taken by Air Canada in 2008.
Air Canada is appealing this decision and filed an application for appeal before the European General Court. In the first quarter
of 2011, Air Canada will be paying the fine, as required, pending the outcome of its 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 million 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.
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 million 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 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. 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.
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 Billy Bishop Toronto City Airport. 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.
The Canadian Union of Public Employees (“CUPE”), which represents Air Canada’s flight attendants, filed a complaint before
the Canadian Human Rights Commissions 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 Commissions, which may now proceed to assess the merits of CUPE’s complaint. On
March 16, 2007, the Canadian Human Rights Commissions 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 Commissions’ investigation.
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.