Westjet 2009 Annual Report Download - page 52

22 WestJet 2009 Annual Report
To facilitate the fi nancing of our Ex-Im Bank–supported aircraft,
we utilize fi ve special-purpose entities (SPE). We have no equity
ownership in the SPEs; however, we are the benefi ciary of their
operations. The accounts of the SPEs have been consolidated in
the fi nancial statements.
We have entered into nine arrangements whereby we participate
in fuel facility corporations, along with other airlines, to contract
for fuel services at major Canadian airports. The fuel facility
corporations operate on a cost recovery basis. The purpose
of these corporations is to own and fi nance the system that
distributes fuel to the contracting airlines, including the leasing
of land rights, while providing the contracting airlines with
preferential service and pricing over non-participating entities.
The operating costs, including debt service requirements,
of the fuel facility corporations are shared pro rata among
the contracting airlines. The nine fuel facility corporations
are considered variable interest entities and have not been
consolidated within our accounts. In the remote event that all
other contracting airlines withdraw from the arrangements and
we remained as sole member, we would be responsible for the
costs of the fuel facility corporations, including debt service
requirements. As at November 30, 2009, the nine fuel facility
corporations have combined total assets of approximately $341.5
million and debt of approximately $307.8 million.
Investing cash flow
Cash used in investing activities for 2009 totalled $166.7 million,
compared to $199.7 million in 2008. During 2009, our investing
activities consisted of $118.7 million in aircraft additions, largely
resulting from the purchase of one leased aircraft during the year
and deposits paid to Boeing on future owned aircraft deliveries.
Additionally, we incurred $48.2 million in other property and
equipment and intangible asset additions. In 2008, our investing
activities included $114.5 million in aircraft additions, mainly
related to expenditures for three new purchased aircraft, as well
as other property and equipment and intangible asset additions,
largely attributable to capital spending on our Calgary Campus
facility, which is now completed.
2.20, compared to 2.29 as at December 31, 2008, due primarily
to the increase in our cash and cash equivalents from the net
proceeds of the equity offering. Both of these ratios remain
strong, relative to the airline industry, and met our internal
targets for December 31, 2009 and 2008, of an adjusted debt-
to-equity measure and an adjusted net debt to EBITDAR ratio of
no more than 3.00.
Operating cash flow
Our ability to generate positive cash fl ows from operations has
allowed us to meet our working capital requirements throughout
the year. During 2009, cash from operations decreased to $318.7
million compared to $460.6 million in 2008, representing a
decline of 30.8 per cent. This year-over-year decrease related
primarily to lower earnings from operations due to the economic
recession.
Financing cash flow
During 2009, our fi nancing cash infl ows of $34.7 million consisted
primarily of the net proceeds from the equity offering of $165.0
million and the proceeds from the US $32.0 million term loan,
offset somewhat by $165.8 million in long-term debt repayments,
largely relating to our aircraft. In 2008, our total cash fl ow used
in fi nancing activities was $115.4 million, consisting primarily of
$179.4 million in long-term debt repayments, $29.4 million to
repurchase shares and $4.1 million in deposits relating mainly
to future leased aircraft. These outfl ows were partially offset by
the issuance of $101.8 million in long-term debt to fi nance three
new purchased aircraft delivered during 2008.
We have yet to pursue fi nancing agreements for our remaining
aircraft commitments, as our next purchased aircraft delivery is
not expected until January 2011.
We have grown through aircraft acquisitions fi nanced by low-
interest-rate debt supported by the Export-Import Bank of
the United States (Ex-Im Bank). The loan guarantees from the
U.S. government represent approximately 85 per cent of the
purchase price of these aircraft. The cumulative number of
aircraft fi nanced with loan guarantees is 52, with an outstanding
debt balance of $1.2 billion associated with those aircraft. All of
this debt has been fi nanced in Canadian dollars at fi xed interest
rates, thus eliminating all future foreign exchange and interest-
rate exposure on these US-dollar aircraft purchases.