Air New Zealand 2008 Annual Report Download - page 42

AIR NEW ZEALAND
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
AS AT 30 JUNE 2008
22. CAPITAL COMMITMENTS (CONTINUED)
On 22 September 2004, the Board of directors approved a plan to purchase seventeen Bombardier Q300 (Q300) aircraft and associated engines to
replace the Group’s SAAB 340 fleet. Approval was subsequently granted to convert an additional six purchase rights into firm orders, bringing the total
order to 23 aircraft. As at 30 June 2008, the Group had taken delivery of twenty-one aircraft. The remaining two aircraft are expected to be delivered
during the period April 2009 to May 2009. As at the date of publishing these financial statements the Group also has the right (but no obligation) to
purchase an additional fifteen Q400 aircraft.
On 3 August 2007, the Company confirmed the purchase of four B777-300ER (B773ER) aircraft, and associated engines, by converting existing
purchase rights into firm commitments. The Company has also converted an additional three purchase rights into options. The B773ER aircraft subject
to firm commitments will be introduced over the period from November 2010 to November 2011.
23. OPERATING LEASE COMMITMENTS
GROUP
2008
$M
GROUP
2007
$M
COMPANY
2008
$M
COMPANY
2007
$M
Aircraft leases payable
Not later than 1 year 227 226 88 110
Later than 1 year and not later than 5 years 349 516 187 234
Later than 5 years 14 13 212 255
590 755 487 599
Property leases payable
Not later than 1 year 26 25 23 23
Later than 1 year and not later than 5 years 75 69 69 62
Later than 5 years 94 71 92 68
195 165 184 153
The Company leases a number of aircraft from its wholly owned subsidiary, Air New Zealand Aircraft Holdings Limited.
New Zealand International Airlines Limited, a wholly owned subsidiary, has the option to purchase two Boeing 737-300 aircraft which are currently under
an operating lease arrangement. The options may be exercised at certain predetermined dates, lapsing in September 2011 and July 2012. The directors
expect that the options will not be exercised.
Subject to negotiation, certain aircraft operating leases give the Group the right to renew the lease.
24. CONTINGENT LIABILITIES
GROUP
2008
$M
GROUP
2007
$M
COMPANY
2008
$M
COMPANY
2007
$M
Uncalled capital of subsidiaries - - 2 2
Guarantee of subsidiary indebtedness - - 1,325 1,384
Letters of credit and performance bonds 21 18 14 12
21 18 1,341 1,398
All significant legal disputes involving probable loss that can be reliably estimated have been provided for in the financial statements. There are no
contingent liabilities for which it is practicable to estimate the financial effect.
Air New Zealand has been named in four class actions. One, in Australia, claims travel agents commission on fuel surcharges and two (one in Australia
and the other in the United States) make allegations against more than 30 airlines, of anti competitive conduct in relation to pricing in the air cargo
business. The allegations made in relation to the air cargo business are also the subject of investigations by regulators in a number of jurisdictions
including the United States and the European Union. A formal Statement of Objections has been issued by the European Commission to 25 airlines
including Air New Zealand and has been responded to. In the event that a court determined, or it was agreed with a regulator, that Air New Zealand
had breached relevant laws, the Company would have potential liability for pecuniary penalties and to third party damages under the laws of the relevant
jurisdictions. The fourth class action alleges (in the United States) that Air New Zealand together with 11 other airlines conspired in respect of fares and
surcharges on trans-Pacific routes. All class actions are being defended. No other significant contingent liability claims are outstanding at balance date.
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