Air Canada 2007 Annual Report Download - page 38

2007 Air Canada Annual Report
38
Air Canada’s free cash fl ow, excluding the consolidation of Jazz operations, decreased $527 million from the fourth quarter
of 2006 and decreased $1,581 million from the full year 2006. The decrease in free cash fl ow was largely related to
additions to capital assets mainly related to aircraft partly offset by an increase in net cash provided by operating activities
during mainly to improved operating results.
In the fourth quarter of 2007, Air Canada’s additions to capital assets totaled $922 million and mainly related to the PDP
fi nancing discussed in section 7.2 of this MD&A and the addition of eight Embraer 190 aircraft. In the year 2007, additions to
capital assets totaled $2,595 million and mainly related to the addition of seven Boeing 777 aircraft, 24 Embraer 190 aircraft
and the PDP fi nancing.
7.5 CONTRACTUAL OBLIGATIONS
The following table provides our contractual obligations at December 31, 2007 for each of the next fi ve years and after
2012. The table also includes the letters of intent for the sale and lease back transactions concluded by Air Canada in
January 2008 which are further described in section 7.7 of this MD&A.
Contractual Obligations
($ millions) Total 2008 2009 2010 2011 2012 Thereafter
Long-term debt obligations $ 2,551 $ 160 $ 152 $ 141 $ 153 $ 166 $ 1,779
Debt consolidated under AcG-15 896 105 51 100 288 73 279
Capital lease obligations 1,394 223 147 142 136 177 569
Operating lease obligations (1) 2,108 339 313 291 230 212 723
Committed capital expenditures (2) 4,739 555 102 760 891 692 1,739
Total contractual obligations (3) $ 11,688 $ 1,382 $ 765 $ 1,434 $ 1,698 $ 1,320 $ 5,089
Pension funding obligations (4) $ 1,715 $ 343 $ 328 $ 338 $ 348 $ 358 N/A
(1) Mainly relate to US dollar aircraft operating leases.
(2) Mainly relate to US dollar aircraft-related expenditures. Also include purchases relating to system development costs, facilities and leasehold improvements.
See section 6.7 of this MD&A for additional information on Air Canada’s planned and committed capital expenditures as well as the related fi nancing arrangements.
(3) Table above excludes commitments for goods and services required in the ordinary course of business. Also excluded are future income taxes and other long-term
liabilities mainly due to reasons of uncertainty of timing of cash fl ows and items which are non-cash in nature.
(4) See section 6.6 of this MD&A for additional information on Air Canada’s pension funding obligations.
Air Canada leases and subleases certain aircraft to Jazz on a fl ow-through basis, which are reported net on Air Canada’s statement
of operations. These leases and subleases relate to 33 Bombardier CRJ-200 aircraft and 15 Bombardier CRJ-705 aircraft.
The subleases with Jazz have the same terms and maturity as Air Canada’s corresponding lease commitments to lessors.
The operating lease commitments under these aircraft, which are recovered from Jazz, are not included in the contractual
obligations table above but are summarized as follows:
Operating lease
commitments ($ millions) Total 2008 2009 2010 2011 2012 Thereafter
Aircraft subleased to Jazz $ 1,067 $ 84 $ 84 $ 76 $ 75 $ 75 $ 673
As at December 31, 2007, the future minimum non-cancelable commitments for the next 12 months under the capacity
purchase agreements with Jazz is approximately $650 million and with unaffi liated regional carriers is $20 million. The
initial term of the Jazz CPA expires December 31, 2015 with two automatic renewal periods of fi ve years each, subject
to either party’s right not to renew by notice at least one year prior to the expiration of the then applicable term. As the
rates under the Jazz CPA are subject to adjustments beginning in 2009, it is not possible to determine the minimum non-
cancelable commitments beyond 2008, however, they are not expected to change signifi cantly from the 2008 amount.