Air Canada 2013 Annual Report Download - page 144

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2013 Air Canada Annual Report
144
21. 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 or other legal restrictions.
The total capital and adjusted net debt as at December 31 is calculated as follows:
2013 2012
Long-term debt and finance leases $3,959 $ 3,259
Current portion of long-term debt and finance leases 374 499
4,333 3,758
Capitalized operating leases 2,226 2,352
Adjusted debt 6,559 6,110
Non-controlling interests 63 59
Market capitalization 2,108 480
Total Capital $8,730 $ 6,649
Adjusted debt $6,559 $ 6,110
Less Cash and cash equivalents and Short-term investments (2,208) (1,973)
Adjusted net debt $4,351 $ 4,137
Total capital has increased by $2,081, which reflects an increase in market capitalization due to a higher Air Canada share
price.