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84 WestJet 2010 Annual Report
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
For the years ended December 31, 2010 and 2009
(Stated in thousands of Canadian dollars,
except share and per share amounts)
12. Commitments and contingencies (continued)
(b) Operating leases and commitments (continued)
As at December 31, 2010, the Corporation is committed to lease an additional three 737-700 aircraft and three 737-800 aircraft for terms ranging
between eight and 10 years in US dollars. These aircraft have been included in the above totals.
The Corporation signed a six-year agreement with Bell ExpressVu to provide satellite programming. The agreement commenced in 2004, expires
in July 2011, and can be renewed for an additional four years. During 2009, the Corporation amended its agreement with LiveTV to install, maintain
and operate live satellite television on all of the Corporation’s aircraft for a term of 10 years. The minimum commitment amounts associated with
these agreements have been included in the totals in the table above.
In 2008, the Corporation signed an agreement with Sabre Airline Solutions (Sabre) to provide the Corporation with a licence to access and use
Sabre’s reservation system, SabreSonic, for a term of eight years. The minimum contract amounts associated with the reservation system have
been included in the totals in the table above.
(c) Letters of guarantee
The Corporation has available two revolving loan credit facilities with a Canadian chartered bank totalling $38,000 (2009 – $38,000). One loan
facility is unsecured for $8,000, and the other is a facility for $30,000 that requires funds to be assigned and held in cash security for the full value
of letters of guarantee issued by the Corporation. As at December 31, 2010, $6,691 (2009 – $12,491) of letters of guarantee were issued under
these facilities. These facilities are secured by a general security agreement and $6,691 (2009 – $4,491) of restricted cash.
(d) Operating line of credit
Commencing in the third quarter of 2009, the Corporation has available a three-year revolving operating line of credit with a syndicate of three
Canadian banks. The line of credit is available to a maximum of $80,750 (2009 − $85,000) and is secured by the Corporation’s Campus facility.
The line of credit bears interest at prime plus 0.50% per annum, or a bankers’ acceptance rate at 2.0% annual stamping fee or equivalent, and is
available for general corporate expenditures and working capital purposes. The Corporation is required to pay an annual standby fee of 15 basis
points, based on the average unused portion of the line of credit for the previous quarter, payable quarterly. As at December 31, 2010, no amounts
were drawn (2009 – $nil).
(e) Fuel facility corporations
The Corporation has entered into nine arrangements whereby it participates under contract in fuel facility corporations, along with other airlines, to
procure fuel services at major Canadian airports. The fuel facility corporations operate on a cost-recovery basis. The purpose of these corporations
is to own and fi nance the system that distributes fuel to the contracting airlines, including the leasing of land rights, while providing the contracting
airlines with preferential service and pricing over non-participating entities. The operating costs, including debt service requirements, of the
fuel facility corporations are shared pro rata among the contracting airlines. The nine fuel facility corporations are considered variable interest
entities and have not been consolidated within the Corporation’s accounts. In the remote event that all other contracting airlines withdraw from
the arrangements and the Corporation remained as sole member, it would be responsible for the costs of the fuel facility corporations, including
debt service requirements. As at November 30, 2010, the nine fuel facility corporations had combined total assets of approximately $345,523
(2009 − $341,487) and debt of approximately $312,625 (2009 − $307,825).
(f) Contingencies
The Corporation is party to 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 the Corporation’s fi nancial position, results of
operations or cash fl ows.