2023 Consolidated Financial Statements and Notes
AIR CANADA
2023 Consolidated Financial Statements and Notes
E) AEROPLAN LOYALTY PROGRAM
The Aeroplan loyalty program generates customer loyalty by rewarding customers who travel with Air Canada. This
program allows program members to earn Aeroplan Points by flying on Air Canada, Star Alliance partners and other
airlines that participate in the Aeroplan loyalty program. When travelling, program members earn redeemable Aeroplan
Points based on a number of factors including the passenger's loyalty program status, distance travelled, booking class
and travel fare paid. Members can also earn Aeroplan Points through participating Aeroplan program partners such as
credit card companies, hotels, car rental agencies and other program partners. Aeroplan Points are redeemable by
members for air travel on Air Canada and other participating airlines, and for other program awards, such as hotel, car
rentals, gift cards, merchandise and other non-air rewards.
Aeroplan members can earn Aeroplan Points: (i) through travel and (ii) based on spending with program partners.
Points Earned with Travel
Passenger ticket sales earning Aeroplan Points under the Aeroplan loyalty program provide members with (1) air
transportation and (2) Aeroplan Points. As a revenue arrangement with multiple performance obligations, each
performance obligation is valued on a relative standalone fair value basis. The value of Aeroplan Points issued is
determined based on the value a passenger receives by redeeming Points for a ticket rather than paying cash, which
is referred to as Equivalent Ticket Value ("ETV"). The ETV is adjusted for Points that are not expected to be redeemed
("breakage"). The consideration allocated to the ETV for Points earned with travel is recorded in Aeroplan deferred
revenue.
Points Earned through Program Partners
Aeroplan members can earn Aeroplan Points based on their spending with participating Aeroplan partners such as
credit card companies, hotels and car rental agencies and other program partners. Aeroplan Points issued under
program partner agreements are accounted for as a single performance obligation being the future delivery of a
redemption reward to the Aeroplan member. The consideration received for Aeroplan Points issued to Aeroplan
members under these agreements is recorded as Aeroplan deferred revenue.
Breakage represents the estimated Aeroplan Points that are not expected to be redeemed by Aeroplan members. The
amount of revenue recognized related to breakage is based on the number of Aeroplan Points redeemed in a period
in relation to the total number of Aeroplan Points expected to be redeemed. The number of Aeroplan Points redeemed
in a period also factors into any revised estimate for breakage. Changes in breakage are accounted for as follows: in
the period of change, the deferred revenue balance is adjusted as if the revised estimate had been used in prior periods
with the offsetting amount recorded as an adjustment to passenger revenue; and for subsequent periods, the revised
estimate is used.
F) OTHER REVENUES
Other revenue is primarily comprised of revenues from the sale of the ground portion of vacation packages, ground
handling services, on-board sales, lounge pass sales and loyalty program marketing fees. 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.
Redemption of Aeroplan Points for non-air goods and services is recorded in other revenue. For non-air redemptions,
the Corporation has determined that, for accounting purposes, it is not the principal in the transaction between the
member and the ultimate supplier of the goods or service. When Points are redeemed for non-air goods and services,
the net margin is recorded in other revenue when the performance obligation is satisfied.
In certain subleases of aircraft to Jazz, for accounting purposes, the Corporation acts as an agent and accordingly
reports the sublease revenues net against capacity purchase fees. 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 and is prepared by the Corporation's consulting actuaries. The cost is
determined using the projected unit credit method and assumptions including discount rates, future increases in
compensation, retirement ages of employees, mortality rates, and health care costs.
Past service costs are recognized in the period of a plan amendment, irrespective of whether the benefits have vested.
Gains and losses on curtailments or settlements are recognized in the period in which the curtailment or settlement
occurs.
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