Air Canada 2008 Annual Report Download - page 48

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2008 Air Canada Annual Report
48
9.7 CAPITAL EXPENDITURES AND RELATED FINANCING ARRANGEMENTS
Boeing
In November 2005, Air Canada concluded agreements with Boeing for the acquisition of Boeing 777 and Boeing 787 aircraft.
As at December 31, 2008, 15 of the 16 Boeing 777 firm aircraft under the purchase agreement with Boeing had been
delivered, with the remaining firm aircraft delivery expected in the first quarter of 2009. The seven aircraft delivered in 2007
were financed under a loan guarantee facility with the Export-Import Bank of the United States (“EXIM”). In January 2008,
the Corporation received a commitment for loan guarantee support from EXIM for all nine 2008 Boeing 777 firm aircraft
deliveries. The loan guarantee, subject to certain conditions, covers a 12-year loan term for 85% of the capital expenditure
at an interest rate based on a floating rate. As at February 12, 2009, eight of the nine 2008 Boeing 777 aircraft have been
delivered, three of these aircraft were financed using the EXIM facility and the other five aircraft were, concurrently with
their purchase, sold by and leased back to Air Canada. The five leases are accounted for as operating leases with 12-year
terms. All leases are at market rates at their inception date. These sale and leaseback transactions replace an equivalent
number of aircraft loan guarantee commitments provided by EXIM. The table below assumes that Air Canada’s remaining
Boeing 777 firm aircraft expected for delivery in 2009 will be financed under the loan guarantee facility with EXIM.
In July 2009, the Corporation expects to take delivery of one Boeing 777-300ER aircraft on a 10-year operating lease.
Boeing notified Air Canada that its first Boeing 787 aircraft originally scheduled for delivery in February 2010 has been
rescheduled for delivery for the second half of 2012, with additional deliveries, originally scheduled for completion between
2010 and 2014, being delayed by approximately three years. Air Canada will be seeking compensation from Boeing. Air
Canada is evaluating alternatives to mitigate any potential impact of this delay
Projected Planned and Committed Capital Expenditures
The table below provides Air Canada’s current projected planned and committed capital expenditures for 2009, for the next
four years and after 2013.
Canadian dollars in millions 2009 2010
2011
2012
2013
Thereafter
Projected committed expenditures $ 141 $ 79 $ 119 $ 438 $ 1,081 $ 3,556
Projected planned but
uncommitted expenditures 108 118 72 121 111
Total projected expenditures (1) (2) 249 197 191 559 1,192
Projected financing on committed expenditures (130) - - (315) (862)
Total projected expenditures, net of financing $ 119 $ 197 $ 191 $ 244 $ 330
(1) US dollar amounts are converted using the December 31, 2008 noon day exchange rate of 1US$ = Cdn$1.2246. Final aircraft delivery prices include estimated
escalation and interest on deferred delivery payments, which is calculated based on the 90-day USD LIBOR rate at December 31, 2008.
(2) The dollar amounts reflected above do not include obligations pertaining to day-to-day operations.