Air Canada 2008 Annual Report Download - page 93

Consolidated Financial Statements and Notes
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- A secured revolving credit facility of up to $100 with the Canadian Imperial Bank of Commerce (“CIBC”)
with draw downs being subject to certain conditions, of which $50 was drawn as at December 31, 2008 for net
proceeds of $47. This facility, which has a one year term, contains a financial covenant requiring the
Corporation to maintain, as of the last business day of each month, a minimum cash level of $900, which
includes the unused and available commitment under the facility and an interest coverage ratio test determined
as at the end of each fiscal quarter. As of February 12, 2009, no amounts were drawn under this facility.
- A secured financing transaction with Calyon New York Branch and Norddeutsche Landesbank Girozentrale for a
$143 loan, of which $97 was received in December 2008 and the remaining received in January 2009, maturing
in December 2013 bearing interest at 5.13%.
- An agreement with Aeroplan Limited Partnership (“Aeroplan”) to accelerate payments for purchase of seats for
the period from October 2008 to May 2009. Payments by Air Canada to Aeroplan for Miles earned by passengers
continue based on the original terms of settlement. Under this arrangement cash flows from operations have
been favourably impacted by $63 as at December 31, 2008. This impact will reverse in 2009 upon expiry of this
agreement.
- Two secured financings amounting to proceeds of $92 and $99, respectively due in 2009 which bear interest at
6.45%.
- Sale and leaseback arrangements for five Boeing 777 aircraft which generated net proceeds of $144. Future lease
payments required under these operating leases are disclosed in Note 14. Management will continue to consider
other opportunities to enter into sale and leaseback arrangements to provide funding if and when necessary.
Refer to Note 6 for a description of debt financing arrangements.
At December 31, 2008, Air Canada had Cash and cash equivalents and Short-term investments of $1,005, which represents
9% of 2008 operating revenues. Management continues to closely monitor the cash flows to ensure the Corporation has
adequate cash resources to meet its obligations and commitments when they become due.
The Corporation has equity in Boeing 777 aircraft and Embraer aircraft, based upon estimated fair value in excess of loan
value, which would be available to support additional financings going forward. Management has developed estimates
of the current value of these assets and identified potential opportunities. However, given the current and continuing
instability of credit markets and economic conditions, there can be no assurance that the Corporation will be able, if needed,
to conclude further transactions, including on acceptable terms or that the Corporation’s assets will generate the expected
proceeds.
A maturity analysis of the Corporation’s financial liabilities, other fixed operating commitments and capital commitments
is set out in Notes 15 and 14, respectively.
The Corporation is faced with several risks that may have a material impact on future operating results and liquidity.
While management believes it has developed planned courses of action and identified other opportunities to mitigate the
operating and liquidity risks, there is no assurance that management will be able to, if needed, achieve any or all of the
opportunities it has identified or obtain sufficient liquidity, including, if events or conditions develop that are not consistent
with management’s expectations and planned courses of actions.
In addition to the risks related to the economic conditions as described above, the following are the key risks that the
Corporation is monitoring which may impact operating results and liquidity:
• Marketrisks
• Pensionfundingobligations
• Covenantsincreditcardagreements
• Cargoinvestigations