Air Canada 2012 Annual Report Download - page 43

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2012 Management’s Discussion and Analysis
43
Cash used for financing activities
Air Canada continued its focus to reduce its debt levels with net debt repayments (reduction of long-term debt less
proceeds from borrowings) of $162 million in the fourth quarter of 2012 and $316 million in the full year 2012.
In 2012, proceeds from borrowings amounted to $126 million, which included net financing proceeds of $41 million
under a credit agreement to refinance amounts related to four Airbus A319 aircraft, with refinanced terms of five years,
as well as additional draws of $82 million under a revolving loan facility.
Cash of $5 million was used during the fourth quarter of 2012 to repurchase and cancel 3,019,600 shares under Air
Canada’s normal course issuer bid which expired on December 11, 2012. Refer to section 9.9 of this MD&A for additional
information.
Cash from (used for) investing activities
Capital expenditures of $462 million for the full year 2012 increased $242 million over 2011. This increase was primarily
related to the ongoing purchase deposit payments on committed Boeing 777 and 787 aircraft, as described in section 9.6
of this MD&A.
9.6. Capital Expenditures and Related Financing Arrangements
Boeing
Air Canada has outstanding purchase commitments with The Boeing Company (“Boeing”) for the acquisition of 37 Boeing 787
aircraft. The first seven deliveries are scheduled for 2014 and the remaining 30 between 2015 and 2019. Air Canada also has
purchase options for 13 Boeing 787 aircraft (entitling Air Canada to purchase aircraft based on previously determined pricing
and delivery positions), and purchase rights for 10 Boeing 787 aircraft (entitling Air Canada to purchase aircraft based on
Boeing’s then current pricing).
Air Canada has financing commitments from Boeing and the engine manufacturer covering 31 of the 37 Boeing 787 firm
aircraft orders. The financing terms for 28 out of the 31 covered aircraft is for 80% of the aircraft delivery price and the term
to maturity is 12 years with straight-line principal repayments. For the remaining three out of the 31 covered aircraft, the
financing under the commitment covers up to 90% of the capital expenditure and 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, Air Canada has outstanding purchase commitments for the acquisition of five Boeing 777 aircraft, all of which will
be added to Air Canada’s mainline fleet in the second half of 2013 and the first half of 2014. Air Canada also has purchase
rights for 13 Boeing 777 (entitling Air Canada to purchase aircraft based on previously determined pricing). Air Canada is
evaluating financing alternatives in the approximate range of $550 million to $650 million, covering all five aircraft. The
impact of such financing is not reflected in the table below.