Air Canada 2010 Annual Report Download - page 40

2010 Air Canada Annual Report
40
9.6 CAPITAL EXPENDITURES AND RELATED FINANCING ARRANGEMENTS
Air Canada has 37 firm orders for Boeing 787 aircraft with The Boeing Company (“Boeing”). Air Canada also holds purchase
options for 13 Boeing 787 aircraft and purchase rights for 10 Boeing 787 aircraft and 18 Boeing 777 aircraft.
In January 2011, Boeing announced that it had delayed the first delivery of the Boeing 787 aircraft from the first quarter
of 2011 to the third quarter of 2011. Air Canada’s first Boeing 787 aircraft is currently scheduled for delivery in the second
half of 2013. The potential impact of Boeing’s January 2011 announcement on Air Canada’s Boeing 787 aircraft deliveries,
if any, has not yet been determined.
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 are 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.
The table below provides Air Canada’s current projected, planned and committed capital expenditures for 2011, for the next
four years and after 2015.
(Canadian dollars in millions) 2011 2012 2013 2014 2015 Thereafter
Projected committed expenditures $ 86 $ 112 $ 700 $ 932 $ 624 $ 2,050
Projected planned but uncommitted expenditures 89 119 113 95 88 n/a
Total projected expenditures (1) 175 231 813 1,027 712 n/a
Projected financing on committed expenditures - - (538) (736) (473) (1,215)
Total projected expenditures, net of financing $ 175 $ 231 $ 275 $ 291 $ 239 n/a
(1) U.S. dollar amounts are converted using the December 31, 2010 noon day exchange rate of US$1 = C$0.9946. Final aircraft delivery prices include estimated escalation
and interest on deferred delivery payments.
Certain maintenance events will be capitalized under International Financial Reporting Standards (“IFRS”) beginning on
January 1, 2011, as opposed to being recorded in maintenance expense under existing Canadian GAAP. As a result, actual
additions to capital assets on Air Canada’s consolidated statement of cash flow under IFRS will reflect these capitalized
maintenance costs. This reflects a change in accounting practice only and will not change the underlying cash flows.
The table above does not reflect this change in accounting practice. Refer to section 16.1 of this MD&A for additional
information on the expected impact of IFRS reporting on Air Canada’s statement of financial position as at January 1, 2010.