Westjet 2006 Annual Report Download - page 30

28 2006 | WestJet Annual Report
CONTRACTUAL OBLIGATIONS, OFF-BALANCE-
SHEET ARRANGEMENTS AND COMMITMENTS
Our contractual obligations for each of the next fi ve years, which
do not include commitments for goods and services required in
the ordinary course of business, are indicated in the table below
(see “Contractual Obligations”).
We currently have 18 Next-Generation aircraft under operating
leases. We have entered into agreements with independent third
parties to lease 11 additional 737-700 aircraft over eight- and 10-
year terms in US dollars and two 737-800 aircraft over a 10-year
term, to be delivered throughout 2007 to 2009. These amounts
have been included at their Canadian-dollar equivalent in the
table above. Although the current obligations related to our
aircraft operating agreements agreements are not recognized on
our balance sheet, we include these commitments in assessing
our overall leverage. Our debt-to-equity ratio, including off-
balance-sheet debt of $442.3 million, was 2.3 to 1 at the end
of 2006 compared to 2.5 to 1 at the end of 2005, which is well
within our self-imposed range of acceptable debt-to-equity
ratios. Although we have increasing debt obligations from new
aircraft purchases, we have successfully maintained an enviable
debt-to-equity ratio that refl ects our ability to effectively manage
our balance sheet.
CONTINGENCIES
On April 4, 2004, Air Canada commenced a lawsuit against
WestJet. Air Canada claimed damages in the amount of
$220 million in an amendment to its statement of claim.
On May 29, 2006, as a full settlement, we agreed to pay Air
Canada’s investigation and litigation costs incurred totalling
Contractual Obligations (THOUSANDS)
Total 2007 2008 2009 2010 2011 Thereafter
Long-term debt repayments $ 1,444,856 $ 153,720 $ 161,425 $ 145,593 $ 144,877 $ 157,466 $ 681,775
Capital lease obligations(1) 2,068 444 444 444 698 38 —
Operating leases(2) 1,237,791 102,375 118,338 137,906 141,627 139,453 598,092
Purchase obligations(3) 301,517 177,776 117,543 6,198 — — —
Total contractual obligations $ 2,986,232 $ 434,315 $ 397,750 $ 290,141 $ 287,202 $ 296,957 $ 1,279,867
(1) Includes weighted average imputed interest at 5.29% totalling $229,000.
(2) Included in operating leases are US-dollar operating leases primarily related to aircraft. The obligations of these operating leases in US dollars are: 2007 – $76,430,000; 2008 – $92,673,000;
2009 – $114,343,000; 2010 – $119,154,000; 2011 – $119,067,000; 2012 and thereafter – $500,035,000.
(3) Relates to purchases of aircraft, live satellite television systems and winglets.
$5.5 million, and accepted Air Canada’s request that WestJet
make a donation in the amount of $10 million in the name of
Air Canada and WestJet to children’s charities across Canada.
Air Canada withdrew its claims in light of this settlement. All
legal proceedings between the parties were terminated. These
amounts and other settlement costs totalling $100,000 have
been paid as at December 31, 2006, and have been included in
non-recurring expenses.
A Statement of Claim was also fi led by Jetsgo Corporation in the
Ontario Superior Court on October 15, 2004, against WestJet, an
offi cer, and a former offi cer (the “Defendants”). The principal
allegations were that the Defendants conspired together to
unlawfully obtain Jetsgo’s proprietary information and to use
this proprietary information to harm Jetsgo and benefi t the
Company. The Plaintiff is seeking damages in an amount to
be determined plus $50 million, but the Plaintiff has provided
no details or evidence to substantiate its claim. On May 13,
2005, Jetsgo Corporation declared bankruptcy. As a result, this
action has been stayed and no further steps can be taken in the
litigation unless a court order is obtained.
We are party to other legal proceedings and claims that arise
during the ordinary course of business. It is the opinion of
management that the ultimate outcome of these and any
outstanding matters will not have a material effect upon our
fi nancial position, results of operations or cash fl ows.