Air Canada 2008 Annual Report Download - page 129

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Consolidated Financial Statements and Notes
129
14. COMMITMENTS
Boeing
As at December 31, 2008, the Corporation has outstanding purchase commitments with The Boeing Company (“Boeing”) for
the acquisition of one Boeing 777 and 37 Boeing 787 aircraft. The Corporation also has purchase rights for 18 Boeing 777
and purchase options for 23 Boeing 787 aircraft. The remaining Boeing 777 aircraft delivery is expected in the first quarter
of 2009 and the Corporation has received notice from Boeing that deliveries of the Boeing 787 aircraft will commence in
the second half of 2012.
For the remaining firm aircraft orders, the Corporation has financing commitments from Boeing and the engine manufacturer
covering the one remaining Boeing 777 and 21 of the 37 Boeing 787. The financing under the commitment covers up to
90% of the capital expenditure and is based on a floating or fixed rate equivalent with an equivalent rate of 7.94% as at
December 31, 2008. The term to maturity is 15 years with principal payments made on a mortgage style basis resulting in
equal installment payments of principal and interest over the term to maturity. In addition to this available financing, the
one remaining Boeing 777 delivery has commitments for loan guarantee support from EXIM. The loan guarantee, subject
to conditions, covers a 12 year loan term for 85 percent of the capital expenditure at an interest rate based on floating
rates. It is expected that this loan guarantee support will be used for the final Boeing 777 aircraft. Should the Corporation
not utilize the Boeing financing commitments on the remaining Boeing 777 aircraft, the financing commitments for the
Boeing 787 aircraft will be increased to 31 aircraft of which the terms for 28 aircraft would be revised to cover 80% of the
aircraft delivery price and the term to maturity would be reduced to 12 years with straight-line principal repayments over
the term to maturity.
In July 2009, the Corporation expects to take delivery of one Boeing 777-300ER on a 10-year operating lease with
International Lease Finance Corporation (“ILFC”).
Embraer
As of December 31, 2008, the Corporation had 7 Embraer 190 series exercisable options remaining.
AircraftInteriorRefurbishmentProgram
In addition to acquiring new aircraft, the Corporation commenced a major refurbishment of the interior of its existing
aircraft in April 2006. The Corporation has completed the refurbishment of all its Airbus A319, A320 and A321 aircraft, one
Airbus A330 and 27 of its 28 Boeing 767-300 aircraft to date, for a total of 116 aircraft. An additional $30 is expected for
2009 refurbishments at which time the refurbishment program will be completed. The Embraer and Boeing 777 aircraft
are being delivered with the new seats and entertainment systems already installed. The capital expenditures associated
with this program, which are committed, are amortized over a five-year period.
Capital Commitments
The estimated aggregate cost of the future firm deliveries and other capital purchase commitments as at December 31, 2008
approximates $5,414 (of which $3,518 is subject to committed financing, subject to the fulfillment of certain terms and
conditions). US dollar amounts are converted using the December 31, 2008 noon day rate of CDN$1.2246. The estimated
aggregate cost of aircraft is based on delivery prices that include estimated escalation and, where applicable, deferred price
delivery payment interest calculated based on the 90-day US LIBOR rate at December 31, 2008.
2009 2010 2011 2012 2013 Thereafter Total
$ 141 $ 79 $ 119 $ 438 $ 1,081 $ 3,556 $ 5,414