Air New Zealand 2012 Annual Report Download - page 45

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AIR NEW ZEALAND ANNUAL FINANCIAL RESULTS 2012
43
24. OPERATING LEASE COMMITMENTS
GROUP
2012
$M
GROUP
2 011
$M
COMPANY
2012
$M
COMPANY
2 011
$M
Aircraft leases payable
Not later than 1 year 139 152 42 73
Later than 1 year and not later than 5 years 467 476 142 149
Later than 5 years 164 253 54 91
770 881 238 313
Property leases payable
Not later than 1 year 35 43 31 38
Later than 1 year and not later than 5 years 96 101 90 93
Later than 5 years 87 103 84 98
218 247 205 229
The Company leases a number of aircraft from its wholly owned subsidiary, Air New Zealand Aircraft Holdings Limited.
Subject to negotiation, certain aircraft operating leases give the Group the right to renew the lease.
25. CONTINGENT LIABILITIES
GROUP
2012
$M
GROUP
2 011
$M
COMPANY
2012
$M
COMPANY
2 011
$M
Uncalled capital of subsidiaries - - 12 12
Guarantee of subsidiary operating lease commitments - - 777 876
Guarantee of subsidiary indebtedness and performance - - 1,548 1,262
Letters of credit and performance bonds 26 34 20 28
26 34 2,357 2,178
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 five class actions. 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 and one class action (in the
United States) alleges that Air New Zealand together with many other airlines conspired in respect of fares and surcharges on trans-
Pacific routes. The likelihood of any liability on the remaining two class actions (one in Australia and the other in Canada) is considered
remote. All class actions are being defended.
The allegations made in relation to the air cargo business are also the subject of proceedings by regulators. Following a detailed, formal
investigation, the European Commission advised in November 2010 that it had closed its file in relation to Air New Zealand. Similarly, an
intensive investigation by the US Department of Justice was concluded by a letter in July 2011 confirming that “Air New Zealand is no
longer a subject or target of the ongoing grand jury investigation”. Air New Zealand has paid no fine nor incurred any penalty in relation
to the European Commission or US Department of Justice investigations.
Two regulators are continuing proceedings in relation to the air cargo business. In December 2008 the New Zealand Commerce
Commission filed proceedings against 13 airlines including Air New Zealand alleging breaches of the Commerce Act 1986. In May
2010 the Australian Competition and Consumer Commission filed proceedings alleging breaches of the (Australian) Trade Practices Act
1974. Air New Zealand, together with certain other airlines, are defending these remaining proceedings.
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. No other
significant contingent liability claims are outstanding at balance date.
There is some uncertainty regarding the tax outcomes associated with foreign exchange movements on the Group’s contracts to
purchase aircraft. The treatment adopted in the annual financial statements is consistent with the approach jointly proposed by the
Inland Revenue Department and the New Zealand Treasury in a discussion document recently released to clarify the intent of the
legislation. If this approach was not adopted, the potential impact may be a temporary difference giving rise to a deferred tax asset and
current tax liability estimated to be in the region of $65 million. In the unlikely event this temporary difference arose it is expected to
reverse in the short to medium term.
Notes to the Financial Statements (Continued)
As at 30 June 2012