Air Canada 2014 Annual Report Download - page 51

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51
2014 Management’s Discussion and Analysis
9.6. CAPITAL EXPENDITURES
AND RELATED FINANCING
ARRANGEMENTS
Aircraft and Related Financing
As at December 31, 2014, Air Canada had outstanding
purchase commitments with Boeing for the
acquisition of 31 Boeing 787 aircraft. Deliveries for
these aircraft are scheduled from 2015 to 2019.
Air Canada 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, Air Canada 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, which is subject to conditions,
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 22 787 aircraft, the financing, which is subject
to conditions, covers terms 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, Air Canada entered
into a sale and leaseback transaction with a third
party for two Boeing 787 firm aircraft.
In March 2014, Air Canada 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 and 2021, subject to deferral and
acceleration rights.
Air Canada 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, Air Canada 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, Air Canada
has purchase rights for 11 Boeing 777 aircraft
(entitling Air Canada 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 Air Canada, 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
million.