Air Canada 2011 Annual Report Download - page 84

2011 Air Canada Annual Report
84
E) AEROPLAN LOYALTY PROGRAM
Air Canada purchases Aeroplan Miles® from Aeroplan, an unrelated party. Air Canada is an Aeroplan partner providing certain
of Air Canada's customers with Aeroplan Miles®, which can be redeemed by customers for air travel or other rewards acquired
by Aeroplan.
Under the CPSA, Aeroplan purchases passenger tickets from Air Canada to meet its obligation for the redemption of Aeroplan
Miles® for air travel. The proceeds from the sale of passenger tickets to Aeroplan are included in Advance ticket sales. Revenue
related to these passenger tickets is recorded in passenger revenues when transportation is provided.
For Aeroplan Miles® earned by Air Canada customers, Air Canada purchases Aeroplan Miles® from Aeroplan in accordance
with the terms of the CPSA. The cost of purchasing Aeroplan Miles® from Aeroplan is accounted for as a sales incentive and
charged against passenger revenues when the points are issued, which occurs upon the qualifying air travel being provided to
the customer.
F) OTHER REVENUES
Other revenue includes revenues from the sale of the ground portion of vacation packages, ground handling services and other
airline related services. Vacation package revenue is recognized as services are provided over the period of the vacation. Other
airline related service revenues are recognized as the products are sold to passengers or the services are provided.
Other revenue also includes revenue related to the lease or sublease of aircraft to third parties. Lease or sublease revenues are
recognized on a straight line basis over the term of the lease or sublease. Rental revenue from operating leases and subleases
amounted to $97 in 2011 (2010 – $101).
In certain subleases of aircraft to Jazz, for accounting purposes, the Corporation acts as an agent and accordingly reports the
sublease revenues net against aircraft rent expense as the terms of the sublease match the terms of the Corporation’s lease.
The Corporation acts as lessee and sublessor in these matters.
G) EMPLOYEE BENEFITS
The cost of pensions, other post-retirement and post-employment benefits earned by employees is actuarially determined
annually as at December 31. The cost is determined using the projected unit credit method and assumptions including market
interest rates, management's best estimate of expected plan investment performance, salary escalation, retirement ages of
employees and health care costs. The expected return on plan assets is based on market expectations at the beginning of the
period for returns over the entire life of the related obligation.
Past service costs are recognized immediately in income unless the changes to the pension plan are conditional on the
employees remaining in service for a specified period of time (the vesting period). In this case these past service costs are
amortized on a straight line basis over the vesting period. Gains and losses on curtailments or settlements are recognized in
the period in which the curtailment or settlement occurs.
Net actuarial gains and losses are recognized immediately in other comprehensive income and deficit without subsequent
reclassification to income. The current service cost and recognized element of any past service cost of employee benefits
expense is recorded in Wages, salaries and benefits. The expected return on plan assets and interest arising on the benefit
obligations are presented net in Net financing expense relating to employee benefits.
Certain of the Corporation's pension plans are subject to minimum funding requirements. The liability in respect of minimum
funding requirements is determined using the projected minimum funding requirements, based on management's best
estimates of the actuarially determined funded status of the plan, market discount rates and salary escalation estimates. The
liability in respect of the minimum funding requirement and any subsequent remeasurement of that liability are recognized
immediately in other comprehensive income and deficit without subsequent reclassification to income.
H) EMPLOYEE PROFIT SHARING PLANS
The Corporation has employee profit sharing plans. Payments are calculated based on full calendar year results and an
expense recorded throughout the year as a charge to Wages, salaries and benefits based on the estimated annual payment
under the plan. The Corporation also has an incentive program which is applicable to certain employees and is paid based on
achieving monthly operational performance targets. Expenses under this program are recorded when the performance targets
are achieved.