Air Canada 2011 Annual Report Download - page 136

Download and view the complete annual report

Please find page 136 of the 2011 Air Canada annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 150

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150

2011 Air Canada Annual Report
136
23. CAPITAL DISCLOSURES
The Corporation views capital as the sum of Long-term debt and finance leases, capitalized operating leases, Non-controlling
interests, and the market value of the Corporation’s outstanding shares (“market capitalization”). The Corporation includes
capitalized operating leases, which is a measure commonly used in the industry ascribing a value to obligations under
operating leases. The value is based on annualized aircraft rent expense multiplied by 7.0, which is a factor commonly used in
the airline industry. The measure used may not necessarily reflect the fair value or net present value related to the future
minimum lease payments as the measure is not based on the remaining contractual payments and the factor may not
recognize discount rates implicit in the actual leases or current rates for similar obligations with similar terms and risks.
Market capitalization is based on the closing price of Air Canada’s shares multiplied by the number of outstanding shares. This
definition of capital is used by management and may not be comparable to measures presented by other public companies.
The Corporation also monitors its adjusted net debt. Adjusted net debt is calculated as the sum of Long-term debt and finance
lease obligations and capitalized operating leases less Cash and cash equivalents and Short-term investments.
The Corporation's main objectives when managing capital are:
To structure repayment obligations in line with the expected life of the Corporation’s principal revenue generating assets;
To ensure the Corporation has access to capital to fund contractual obligations as they become due and to ensure
adequate cash levels to withstand deteriorating economic conditions;
To maintain an appropriate balance between debt supplied capital versus investor supplied capital; and
To monitor the Corporation’s credit ratings to facilitate access to capital markets at competitive interest rates.
In order to maintain or adjust the capital structure, the Corporation may adjust the type of capital utilized, including purchase
versus lease decisions, defer or cancel aircraft expenditures by not exercising available options or selling current aircraft
options, issuing debt or equity securities, and repurchasing outstanding shares, all subject to market conditions and the terms
of the underlying agreements.
The total capital and adjusted net debt as at December 31 is calculated as follows:
2011 2010
Long-term debt and finance leases $3,906 $ 4,028
Current portion of long-term debt and finance leases 424 567
4,330 4,595
Capitalized operating leases 2,345 2,471
Adjusted debt 6,675 7,066
Non-controlling interests 79 146
Market capitalization 275 962
Total Capital $7,029 $ 8,174
Adjusted debt $6,675 $ 7,066
Less Cash and cash equivalents and Short-term investments (2,099) (2,192)
Adjusted net debt $4,576 $ 4,874
The adjusted net debt has decreased by $298 in 2011 mainly due to debt repayments of $608, partially offset by proceeds
from borrowings of $232.