Air Canada 2009 Annual Report Download - page 135

Consolidated Financial Statements and Notes
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16. CAPITAL DISCLOSURES
The Corporation views capital as the sum of Long-term debt and capital leases, Non-controlling interest, capitalized
operating leases, and Shareholders’ equity. As at December 31, 2008, the Corporation had pre-delivery fi nancing arranged,
which was related to future deliveries, and, as the aircraft had not yet been delivered, this debt was excluded from the capital
base. The Company includes capitalized operating leases, which is a measure commonly used in the industry ascribing a
value to obligations under operating leases. The value is based on annualized aircraft rent expense multiplied by 7.5, which
is a factor commonly used in the airline industry. The measure used may not necessarily refl ect the fair value or net present
value related to the future minimum lease payments as the measure is not based on the remaining contractual payments
and the factor may not recognize discount rates implicit in the actual leases or current rates for similar obligations with
similar terms and risks. This defi nition of capital is used by management and may not be comparable to measures presented
by other public companies.
The Corporation also monitors its ratio of adjusted net debt to net debt plus shareholders’ equity. Adjusted net debt is
calculated as the sum of Long-term debt and capital lease obligations, Non-controlling interest, capitalized operating
leases, and Shareholders’ equity less Cash and cash equivalents and Short-term investments.
The Corporation’s main objectives when managing capital are:
• to structure repayment obligations in line with the expected life of the Corporation’s principal revenue generating assets;
• to ensure the Corporation has access to capital to fund contractual obligations as they become due and to ensure
adequate cash levels to withstand deteriorating economic conditions;
• to maintain an appropriate balance between debt supplied capital versus investor supplied capital as measured by
the adjusted net debt to net debt plus equity ratio; and
• to monitor the Corporation’s credit ratings to facilitate access to capital markets at competitive interest rates.
In order to maintain or adjust the capital structure, the Corporation may adjust the type of capital utilized, including purchase
versus lease decisions, defer or cancel aircraft expenditures by not exercising available options or selling current aircraft options,
and issuing debt or equity securities, all subject to market conditions and the terms of the underlying agreements.
The total capital as at December 31 is calculated as follows:
2009 2008
Long-term debt and capital leases $ 4,054 $ 4,691
Current portion of long-term debt and capital leases 468 663
4.522 5,354
Non-controlling interest 201 190
Capitalized operating leases 2.513 2,093
Less pre-delivery fi nancing included in long-term debt - (81)
Adjusted debt and non-controlling interest 7,236 7,556
Shareholders’ equity 1,446 762
Total Capital $ 8,682 $ 8,318
Adjusted debt and non-controlling interest $ 7,236 $ 7,556
Less Cash and cash equivalents and Short-term investments (1,407) (1,005)
Adjusted net debt and non-controlling interest $ 5,829 $ 6,551
Adjusted net debt to adjusted net debt plus shareholders’ equity ratio 80.1% 89.6%
The adjusted net debt and non-controlling interest amount has decreased by $722 in 2009 largely attributable to the
impact of the appreciation of the Canadian dollar and the resulting impact on US dollar debt. The increase in the cash
balance during the year was also a signifi cant contributor driven by the completion of a share and warrant public offering
and other transactions described in Note 1C.