Air Canada 2014 Annual Report Download - page 66

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66 2014 Annual Report
the five Fuel Facility Corporations in Canada that have
not been consolidated by Air Canada under IFRS 10
Consolidated Financial Statements is approximately
$399 million as at December 31, 2014 (December 31,
2013 – $394 million), which is Air Canada’s maximum
exposure to loss before taking into consideration
the value of the assets that secure the obligations
and any cost sharing that would occur amongst the
other contracting airlines. Air Canada 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. The maturities of these debt arrangements vary
but generally extend beyond five years.
Indemnification Agreements
In the ordinary course of Air Canada’s business,
Air Canada enters into a variety of agreements,
some of which may provide for indemnifications to
counterparties that may require Air Canada to pay for
costs and/or losses incurred by such counterparties.
Air Canada cannot reasonably estimate the potential
amount, if any, it could be required to pay under such
indemnifications. Such amount would also depend
on the outcome of future events and conditions,
which cannot be predicted. While certain agreements
specify a maximum potential exposure, certain others
do not specify a maximum amount or a limited
period. Historically, Air Canada has not made any
significant payments under these indemnifications.
Air Canada enters into real estate leases or operating
agreements, which grant a license to Air Canada
to use certain premises, in substantially all cities
that it serves. It is common in such commercial
lease transactions for Air Canada, as the lessee, to
agree to indemnify the lessor and other related
third parties for tort liabilities that arise out of
or relate to Air Canada’s use or occupancy of the
leased or licensed premises. Exceptionally, this
indemnity extends to related liabilities arising
from the negligence of the indemnified parties,
but usually excludes any liabilities caused by their
gross negligence or wilful misconduct. Additionally,
Air Canada typically indemnifies such parties for any
environmental liability that arises out of or relates
to its use or occupancy of the leased or licensed
premises.
In aircraft financing or leasing agreements, Air Canada
typically indemnifies the financing parties, trustees
acting on their behalf and other related parties
and/or lessors against liabilities that arise from the
manufacture, design, ownership, financing, use,
operation and maintenance of the aircraft and for
tort liability, whether or not these liabilities arise out
of or relate to the negligence of these indemnified
parties, except for their gross negligence or wilful
misconduct. In addition, in aircraft financing or
leasing transactions, including those structured
as leveraged leases, Air Canada typically provides
indemnities in respect of various tax consequences
including in relation to the leased or financed aircraft,
the use, possession, operation maintenance, leasing,
subleasing, repair, insurance, delivery, import, export
of such aircraft, the lease or finance arrangements
entered in connection therewith, changes of law and
certain income, commodity and withholding tax
consequences.
When Air Canada, as a customer, enters into technical
service agreements with service providers, primarily
service providers who operate an airline as their main
business, Air Canada has from time to time agreed
to indemnify the service provider against certain
liabilities that arise from third party claims, which
may relate to services performed by the service
provider.
Under its general by-laws and pursuant to contractual
agreements between Air Canada and each of its
officers and directors, Air Canada has indemnification
obligations to its directors and officers. Pursuant
to such obligations, Air Canada indemnifies these
individuals, to the extent permitted by law, against
any and all claims or losses (including amounts paid
in settlement of claims) incurred as a result of their
service to Air Canada.
16. RELATED PARTY TRANSACTIONS
At December 31, 2014, Air Canada had no transactions with related parties as defined in the CPA Handbook,
except those pertaining to transactions with key management personnel in the ordinary course of their
employment or directorship agreements.