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4848 2014 Annual Report
Movements in current assets and current liabilities are described in section 9.4 “Working Capital” of this MD&A.
Long-term debt and finance leases are discussed in sections 9.3 “Adjusted Net Debt” and 9.5 “Consolidated Cash
Flow Movements” of this MD&A.
At December 31, 2014, Property and equipment amounted to $5,998 million, an increase of $925 million from
December 31, 2013. The increase in Property and equipment was mainly due to additions to Property and
equipment of $1,521 million in 2014, partially offset by the impact of depreciation expense of $502 million.
The additions to Property and equipment included flight equipment purchases of $937 million, which included
one Boeing 777-300ER aircraft delivered in February and six Boeing 787-8 aircraft delivered in 2014, progress
payments on future aircraft deliveries of $229 million, and capitalized maintenance costs of $177 million.
At December 31, 2014, Pension and other benefit liabilities decreased $284 million from December 31, 2013,
mainly due to strong investment returns on pension plan assets partly offset by the impact of lower prescribed
pension plan discount rates as at December 31, 2014 versus 2013 with respect to its pension plans. Pension
funding payments of $445 million were made in 2014. Refer to section 9.7 “Pension Funding Obligations” of
this MD&A for additional information.
9.3. ADJUSTED NET DEBT
The following table reflects Air Canada’s adjusted net debt balances as at December 31, 2014 and as at
December 31, 2013.
CANADIAN DOLLARS IN MILLIONS,
EXCEPT WHERE INDICATED DECEMBER 31, 2014 DECEMBER 31, 2013 $ CHANGE
Total long-term debt and finance leases $ 4,732 $ 3,959 $ 773
Current portion of long-term debt and finance leases 484 374 110
Total long-term debt and finance leases,
including current portion 5,216 4,333 883
Less cash, cash equivalents and short-term investments (2,275) (2,208) (67)
NET DEBT $ 2,941 $ 2,125 $ 816
Capitalized operating leases (1) 2,191 2,226 (35)
ADJUSTED NET DEBT $ 5,132 $ 4,351 $ 781
EBITDAR (EXCLUDING THE IMPACT OF BENEFIT PLAN
AMENDMENTS) (TRAILING 12 MONTHS) $ 1,671 $ 1,433 $ 238
ADJUSTED NET DEBT TO EBITDAR RATIO 3.1 3.0 $ 0.1
1 Adjusted net debt is a non-GAAP financial measure used by Air Canada and may not be comparable to measures presented by other public companies. Adjusted net debt is a key
component of the capital managed by Air Canada and provides management with a measure of its net indebtedness. Air Canada includes capitalized operating leases which is a
measure commonly used in the industry to ascribe a value to obligations under operating leases. Common industry practice is to multiply annualized aircraft rent expense by 7. This
definition of capitalized operating leases is used by Air Canada and may not be comparable to similar measures presented by other public companies. Aircraft rent was $313 million for
the 12 months ended December 31, 2014 and $318 million for the 12 months ended December 31, 2013.
At December 31, 2014, total long-term debt and finance leases, including current portion, amounted to
$5,216 million, an increase of $883 million from December 31, 2013. This increase was due to new borrowings
of $1,178 million partly offset by debt repayments of $677 million. In 2014, Air Canada completed a private
offering of US$400 million of 7.75% senior unsecured notes due 2021 which is further described below. In
addition, Air Canada took delivery of the fifth Boeing 777-300ER aircraft, which was financed under the private
offering of enhanced equipment trust certificates, as well as the first six of 37 Boeing 787 aircraft, which were
financed with support from the Export-Import Bank of the United States (“EXIM”). Refer to section 9.6 “Capital
Expenditures and Related Financing Arrangements” of this MD&A for additional information. Debt repayments
included an optional repayment of $182 million on the outstanding balance under a revolving loan facility. In
addition, in 2014, Air Canada disposed of its two Airbus A340-500 aircraft and repaid the financing related to
these aircraft in the amount of $90 million. No gain or loss was recorded on the sale. The unfavourable impact
of a weaker Canadian dollar as at December 31, 2014 compared to December 31, 2013 on Air Canada’s foreign
currency denominated debt (mainly U.S. dollars), which accounted for an increase of $365 million, was also a
contributing factor to the increase in long-term debt.
Adjusted net debt amounted to $5,132 million at December 31, 2014, an increase of $781 million from
December 31, 2013, mainly due to the higher long-term debt and finance lease balances.