Air Canada 2014 Annual Report Download - page 75

75
2014 Management’s Discussion and Analysis
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-ACPA 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.
FUTURE LEGAL PROCEEDINGS
Airlines are susceptible to various claims and
litigation, including class action claims, in the course
of operating their business or with respect to the
interpretation of existing agreements. Any future
claims or litigation could also have a material adverse
effect on Air Canada, its business, results from
operations and financial condition.
KEY PERSONNEL
Air Canada is dependent on the experience and
industry knowledge of its executive officers and
other key employees to execute its business plan. If
Air Canada were to experience a substantial turnover
in its leadership or other key employees, Air Canada,
its business, results from operations and financial
condition could be materially adversely affected.
Additionally, Air Canada may be unable to attract and
retain additional qualified key personnel as needed in
the future.
RISKS RELATING TO THE
AIRLINE INDUSTRY
Terrorist Attacks and Security Measures
The potential for terrorist attacks and terrorist
activity causes uncertainty in the minds of the
travelling public. The occurrence of a terrorist
attack (or attempted attacks) (whether domestic or
international and whether involving Air Canada or
another carrier or no carrier at all) and increasingly
restrictive security measures, such as those relating
to the content of carry-on baggage, passenger
identification document requirements, and passenger
screening procedures could have a material adverse
effect on passenger demand for air travel and on
the number of passengers travelling on Air Canada’s
flights. It could also lead to a substantial increase
in insurance, airport security and other costs. Any
resulting reduction in passenger revenues and/or
increases in costs, including insurance, security or
other costs could have a material adverse effect on
Air Canada, its business, results from operations and
financial condition.
Epidemic Diseases (Severe Acute Respiratory
Syndrome (SARS), H1N1 Influenza, Ebola or
Other Epidemic Diseases)
The international outbreaks of Severe Acute
Respiratory Syndrome (SARS) in 2003, and the
resulting actions of the World Health Organization
(the “WHO”), including a travel advisory against non-
essential travel to Toronto, Canada, had a significant
adverse effect on passenger demand for air travel
in Air Canada’s markets and resulted in a major
negative impact on traffic on the entire network. An
outbreak of influenza, SARS, H1N1 influenza virus,
Ebola or of another virus or epidemic disease (whether
domestic or international) or any WHO or similar
travel advisories (whether relating to Canadian cities
or regions or other cities, regions or countries) could
have a material adverse effect on passenger demand
for air travel. Any resulting reduction in traffic in the
markets served by Air Canada could have a material
adverse effect on Air Canada, its business, results
from operations and financial condition.
Casualty Losses
Due to the nature of its core operating business,
Air Canada may be subject to liability claims arising
out of accidents or disasters involving aircraft on which
Air Canada’s customers are travelling or involving
aircraft of other carriers maintained or repaired by
Air Canada, including claims for serious personal injury
or death. There can be no assurance that Air Canada’s
insurance coverage will be sufficient to cover one or
more large claims and any shortfall may be material.
Additionally, any accident or disaster involving an
aircraft operated by or on behalf of Air Canada or an
aircraft of another carrier receiving line maintenance
services from Air Canada may significantly harm
Air Canada’s reputation for safety, which would have
a material adverse effect on Air Canada, its business,
results from operations and financial condition.
Seasonal Nature of the Business, Other
Factors and Prior Performance
Air Canada has historically experienced considerably
greater demand for its services in the second and
third quarters of the calendar year and significantly
lower demand in the first and fourth quarters of the
calendar year. This demand pattern is principally
a result of the preference of a high number of
leisure travellers to travel during the spring and
summer months. Air Canada has substantial fixed