Investor Presentaiton
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(which Air Canada was leasing at the time) for an aggregate amount of $353 million. The purchase price was
paid for with $290 million in cash and the issuance of a limited-recourse loan in the amount of US$50
million. The two Boeing 747-400 Combi aircraft were sold in December 2004 and January 2005 and the
proceeds from such sale were used to repay the US$50 million loan from GECC.
Pension Plan Arrangements
The solvency position of Air Canada's defined benefit registered pension plans deteriorated significantly in 2002 as
a result of various macroeconomic developments, triggering a series of valuation and funding directions to Air Canada
by OSFI, the federal pension regulator, in March 2003. On September 30, 2004, after negotiations with OSFI and
representatives of the pension plan stakeholders, the Air Canada Pension Plan Solvency Deficiency Funding
Regulations came into effect. The regulations extended the usual five-year amortization period for solvency deficits to
ten years, and provided for the making of variable annual amortization payments according to an agreed schedule rather
than the usual equal annual payments. Air Canada also issued a series of subordinated secured promissory notes in the
aggregate initial amount of approximately $347 million in favour of the pension plan trustees, of which approximately
$185 million are outstanding as at January 31, 2007. The promissory notes are secured by a second priority charge over
assets of Air Canada and certain of its affiliates and will be reduced by the capital portion of the solvency deficit
amortization payments made by Air Canada to the pension plans in accordance with the agreed schedule. See "Risk
Factors Risks Relating to the Corporation. Pension Plans".
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Arrangements with Unions
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Following its filing for protection under the CCAA, Air Canada concluded in 2003 and amended in 2004 long-
term collective agreements with the International Association of Machinists and Aerospace Workers ("IAMAW"), the
Air Canada Pilots Association ("ACPA"), the Canadian Union of Public Employees ("CUPE"), the Canadian Air Line
Dispatchers Association ("CALDA"), the National Automobile, Aerospace, Transportation and General Workers
Union of Canada ("CAW") and the International Brotherhood of Teamsters ("IBT"), which expire in 2009. Air Canada
also concluded agreements with the Transport and General Workers Union ("TGWU") and Amicus, both in the United
Kingdom. All these labour agreements were ratified by the members of their respective bargaining units. The
agreements provided for a combination of productivity improvements and wage reductions. All unconditional
employment security provisions in the collective agreements were also eliminated. All scheduled bonus payments and
wage increases were cancelled and all overtime is now paid at one and a half times the applicable pay rate. Air Canada
also entered into "clean slate" agreements with all of its North American unions where the parties agreed to resolve,
waive or compromise outstanding grievances.
These collective agreements provide that no strikes or lock-outs may lawfully occur during the term of the
collective agreements. In 2006, Air Canada concluded wage re-opener agreements, mediations or arbitrations under the
collective agreements with all its union groups. It is still awaiting the arbitrator's decision in respect of its flight
attendants, who are represented by CUPE. The CUPE arbitration award decision is expected during the second quarter
of 2007. The wage increases awarded or agreed upon range up to 2.6% per year until 2009.
In March 2007, Air Canada concluded an agreement with both the TGWU and the Amicus, which represent Air
Canada's ground handling employees in the United Kingdom, allowing Air Canada to keep certain ground handling
activities at London Heathrow airport in-house. The agreement provides for a number of changes to working practices
for current employees as well as structural changes for the future. Under the agreement, the existing defined benefit
pension plan will be closed for newly hired employees, which will be covered by a new defined contribution pension
plan.
Contract Renegotiation/Repudiation during CCAA
During the restructuring period, Air Canada reviewed all of its real estate facilities, resulting in the elimination of
unused or under-utilized facilities and the consolidation of its operations to further reduce operating costs. In addition,
Air Canada evaluated all of its contracts for goods and services to identify opportunities to consolidate its supply base,
to better leverage its buying power, and to take advantage of the opportunity represented by the restructuring process to
repudiate contracts that were unfavourable.
In addition, Air Canada conducted extensive negotiations with its aircraft lessors and financiers to restructure its
aircraft ownership and leasing costs. Through these efforts, Air Canada, together with Jazz, achieved: (i) reduced
ownership and leasing costs more consistent with then current market conditions, (ii) modified lease expiry dates basedView entire presentation