Air Canada 2013 Annual Report Download - page 140

2013 Air Canada Annual Report
140
18. CONTINGENCIES, GUARANTEES AND INDEMNITIES
Contingencies and Litigation Provisions
Investigations by Competition Authorities Relating to Cargo
The European Commission and the United States Department of Justice investigated, and the Competition Bureau in Canada is
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 in several jurisdictions 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 also named as a defendant, and may otherwise become implicated, in a number of class action
lawsuits and other proceedings in Canada, Europe and the United States in connection with these allegations. In the United
States, the investigation by the US Department of Justice concluded with no proceedings having been instituted against
Air Canada and in 2012, the Corporation entered into a settlement agreement relating to class action proceedings in the
United States in connection with these allegations under which Air Canada made a payment of $8 without any admission of
liability.
In 2010, the European Commissions rendered 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) was
imposed on Air Canada. Air Canada is appealing this decision and filed an application for appeal before the European General
Court. In 2011, Air Canada paid the fine, as required, pending the outcome of its appeal.
As at December 31, 2013, Air Canada has a provision of $27 relating to outstanding claims in this matter, which is recorded in
Accounts payable and accrued liabilities. This provision is an estimate based upon the status of investigations and proceedings
at this time and Air Canada’s assessment as to the potential outcome for certain of them. The 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.
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 previous Air Canada-Air Canada Pilots Association collective agreement, which
incorporated provisions of the pension plan terms and conditions applicable to pilots requiring them to retire at age 60.
Air Canada has fully or partially resolved some of these complaints and is defending others. 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 defence 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 12 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.
Refer to Note 10 for a continuity schedule of litigation provisions.