Air Canada 2008 Annual Report Download - page 45

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2008 Management’s Discussion and Analysis
45
9.5 CONTRACTUAL OBLIGATIONS
The table below provides Air Canada’s current contractual obligations for 2009, for the next four years and after 2013.
(Canadian dollars
in millions) 2009 2010 2011 2012 2013 Thereafter Total
Long-term debt obligations $ 487 $ 239 $ 257 $ 275 $ 325 $ 1,699 $ 3,282
Debt consolidated under AcG-15 70 136 378 90 37 323 1,034
Capital lease obligations 106 110 113 173 124 456 1,082
Interest repayment obligations (1) 312 273 231 199 166 504 1,685
Operating lease obligations (2) 416 398 354 331 293 860 2,652
Committed capital expenditures (3) 141 79 119 438 1,081 3,556 5,414
Totalcontractualobligations(4) $ 1,532 $ 1,235 $ 1,452 $ 1,506 $ 2,026 $ 7,398 $ 15,149
(1) The interest repayment obligations relate to long-term debt, debt consolidated under AcG-15 and capital leases.
(2) The operating lease obligations above mainly relate to US dollar aircraft operating leases.
(3) The committed capital expenditures above mainly relate to US dollar aircraft-related expenditures. These expenditures also include purchases relating to system
development costs, facilities and leasehold improvements.
(4) Total contractual obligations exclude commitments for goods and services required in the ordinary course of business. Also excluded are other long-term liabilities
mainly due to reasons of uncertainty of timing of cash flows and items which are non-cash in nature.
Refer to section 9.6 below for information on Air Canada’s pension plan funding obligations.
Fair Value Test
Certain aircraft lease agreements contain a fair value test, beginning on July 1, 2009, and annually thereafter until lease
expiry. This test relates to 26 aircraft under lease of which 23 are accounted for as capital leases. Under the test, the
Corporation may be required to prepay certain lease amounts, based on aircraft fair values, as of the date of the test. Any
amounts prepaid would be recorded as a reduction of the lease obligation. The Corporation contracts with certain third
parties to provide residual value support for certain aircraft. If the Corporation is required to prepay lease obligations as a
result of value tests, these amounts would be recoverable from the third party residual value support provider upon lease
expiry to the extent that the adjusted obligation taking into account prepayments is less than the residual value support.
The maximum amount payable on July 1, 2009, assuming the related aircraft are worth nil, is $896 million (US$731 million).
The maximum payable amount declines over time to nil upon lease expiry. As the Corporation does not expect to have
to prepay any significant amounts based upon expectations of aircraft fair values into the future, the amortized cost of
these capital lease obligations reflects the scheduled payments over the term to final maturity. However, there can be no
assurance that aircraft fair values will not decrease in the future such that the Corporation would be required to prepay
significant amounts.