Air Canada 2014 Annual Report Download - page 123

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123
2014 Consolidated Financial Statements and Notes
AIRCRAFT AND RELATED FINANCING
As at December 31, 2014, the Corporation has
outstanding purchase commitments with The Boeing
Company (“Boeing”) for the acquisition of 31 Boeing
787 aircraft. Deliveries for these aircraft are scheduled
from 2015 to 2019. The Corporation also has
purchase options for 13 Boeing 787 aircraft (entitling
Air Canada to purchase aircraft based on previously
determined pricing and delivery positions), and
purchase rights for 10 Boeing 787 aircraft (entitling
Air Canada to purchase aircraft based on Boeing’s
then current pricing).
Subject to certain conditions, the Corporation
has financing or sale and leaseback commitments
covering up to 26 of the remaining 31 Boeing 787
firm aircraft orders, which such commitments are
summarized as follows:
• Final commitment from EXIM, subject to
documentation and other conditions, for one 787
aircraft scheduled for delivery in February 2015
• For one 787 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
• For 22 of the 787 aircraft, the financing terms
are for 80% of the aircraft delivery price and the
term to maturity is 12 years with straight-line
principal repayments
• In the fourth quarter of 2014, the Corporation
entered into a sale and leaseback transaction with
a third party for two Boeing 787 firm aircraft
In March 2014, the Corporation concluded an
agreement with Boeing for the purchase of
Boeing 737 MAX aircraft. This agreement includes
firm orders for 33 737 MAX 8 and 28 737 MAX 9
aircraft with substitution rights between them as
well as for the 737 MAX 7 aircraft. It also provides
for purchase options for 18 Boeing 737 aircraft and
certain rights to purchase an additional 30 Boeing
737 aircraft. Deliveries are scheduled to begin in 2017
with two aircraft, and with the remaining deliveries
between 2018 to 2021, subject to deferral and
acceleration rights.
The Corporation has financing commitments, subject
to certain conditions, covering up to all 61 of the Boeing
737 MAX firm aircraft orders. The financing terms are
for 80% of the aircraft delivery price and the term to
maturity is 10 years with mortgage-style repayments.
In 2014, the Corporation exercised purchase rights
for two Boeing 777 aircraft, with scheduled deliveries
in the second quarter of 2016. Financing alternatives
will be considered prior to the planned delivery
dates of these aircraft. As at December 31, 2014, the
Corporation has purchase rights for 11 Boeing 777
(entitling the Corporation to purchase aircraft based
on previously determined pricing).
Certain of the financing commitments for the
Boeing 787 aircraft and/or the Boeing 737 MAX
aircraft will be reduced based on allocation of the
commitment between aircraft type to be determined
by the Corporation, although the specifics of the
reduction have not yet been determined. Taking the
estimated financing reduction into consideration,
the total committed financing on these Boeing 787
aircraft and/or the Boeing 737 MAX aircraft, including
commitments from EXIM and the sale and leaseback
transaction with a third party will be at least $4,643.
16. COMMITMENTS