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WestJet 2010 Annual Report 41
As at December 31, 2010, fuel derivatives of $5.7 million
(2009 – $0.1 million) and foreign exchange derivatives of $nil
(2009 – $0.2 million) outstanding with our counterparties were
in an asset position. We do not expect these counterparties to fail
to meet their obligations.
We are not exposed to counterparty credit risk on our deposits
that relate to purchased aircraft, as the funds are held in a security
trust separate from the assets of the financial institution. While
we are exposed to counterparty credit risk on our deposits
relating to airport operations, we consider this risk as remote
because of the nature of the deposit and the credit risk rating of
the counterparty.
Liquidity risk
Liquidity risk is the risk that we will encounter difficulty in meeting
obligations associated with financial liabilities. We maintain
a strong liquidity position and sufficient financial resources to
meet our obligations as they fall due.
The table below presents a maturity analysis of our undiscounted
contractual cash flow for our non-derivative and derivative
financial liabilities as at December 31, 2010. The analysis, based
on foreign exchange and interest rates in effect at the balance
sheet date, includes both principal and interest cash flows for
long-term debt and obligations under capital leases.
A portion of our cash and cash equivalents balance relates to
cash collected on advance ticket sales, for which the balance at
December 31, 2010, was $308.0 million (2009 – $286.4 million).
Typically, we have cash and cash equivalents on hand to have
sufficient liquidity to meet our liabilities when due, under both
normal and stressed conditions. As at December 31, 2010,
we had cash on hand of 3.86 (2009 – 3.51) times the advance
ticket sales balance. We aim to maintain a current ratio of at
least 1.00. As at December 31, 2010, our current ratio was
1.52 (2009 – 1.48). As at December 31, 2010, we have not been
required to post collateral with respect to any of our outstanding
derivative contracts.
Fair value of financial instruments
Fair value represents a point-in-time estimate. The carrying
amount of cash and cash equivalents, accounts receivable, and
accounts payable and accrued liabilities included in the balance
sheet approximate their fair values because of the short-term
nature of the instruments. The fair value of deposits, which relate
to purchased aircraft and airport operations, approximates their
carrying amounts as they are at a floating market rate of interest.
At December 31, 2010, the fair value of our fixed-rate long-term
debt was approximately $1,142.0 million (2009 – $1,323.1 million).
($ in thousands)
Carrying
Amount Within 1 year 1–3 years 4–5 years Over 5 years
Accounts payable and accrued liabilities (i) $ 299,204 $ 299,204 $ — $ — $ —
Foreign exchange derivatives 3,579 3,579 — — —
Fuel derivatives 800 800 — — —
Long-term debt 1,232,319 235,215 414,455 341,920 240,729
Obligations under capital leases 5,878 282 490 490 4,616
Total $ 1,541,780 $ 539,080 $ 414,945 $ 342,410 $ 245,345
(i) Excludes foreign exchange derivatives of $3,579 and fuel derivatives of $800.