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Notes to Consolidated Financial Statements
For the years ended December 31, 2012 and 2011
(Stated in thousands of Canadian dollars, except share and per share amounts)
9. Maintenance provisions and reserves
The Corporation’s operating aircraft lease agreements require leased aircraft to be returned to the lessor in a specified operating
condition. The maintenance provision liability represents the present value of the expected future cost. A maintenance expense
is recognized over the term of the provision based on aircraft usage and the passage of time, while the unwinding of the present
value discount is recognized as a finance cost. The majority of the Corporation’s maintenance provision liabilities are recognized
and settled in US dollars. Where applicable, all amounts have been converted to Canadian dollars at the period end foreign
exchange rate.
2012
2011
Opening balance
151,890
125,578
Additions
33,502
27,758
Change in estimate (i)
(3,866)
8,675
Foreign exchange
(3,479)
2,775
Accretion (ii)
2,013
5,078
Settled
(269)
(17,974)
Ending balance
179,791
151,890
Current portion
(34,135)
(245)
Long-term portion
145,656
151,645
(i) Reflects changes to the timing and scope of maintenance activities and the discount rate used to present value the liability.
(ii) At December 31, 2012, the Corporation’s aircraft lease maintenance provisions are discounted using a weighted average risk-free rate of approximately
1.16% to reflect the weighted average remaining term of approximately 38 months until cash outflow.
A certain number of operating aircraft leases also require the Corporation to pay a maintenance reserve to the lessor.
Maintenance reserves are either refunded when qualifying maintenance is performed or offset against end of lease obligations
for returning leased aircraft in a specified operating condition. Where the amount of maintenance reserves paid exceeds the
estimated amount recoverable from the lessor, the non-recoverable amount is recorded as maintenance expense in the period it
is incurred. The Corporation’s maintenance reserves are recognized and settled in US dollars. Where applicable, all amounts
have been converted to Canadian dollars at the period end foreign exchange rate.
As at December 31, 2012, the current portion of maintenance reserves included in prepaid expenses, deposits and other is
$32,586 (2011 – $nil) and the long-term portion of maintenance reserves included in other assets is $21,277 (2011 – $49,655).
10. Long-term debt
December 31
2012
December 31
2011
Term loans – purchased aircraft (i)
669,859
828,104
Term loans – purchased aircraft (ii)
69,154
Term loan – Calgary hangar facility (iii)
35
608
739,048
828,712
Current portion
(164,909)
(158,832)
574,139
669,880
(i) 52 individual term loans, amortized over a 12-year term, repayable in quarterly principal instalments totalling $40,676, at an effective weighted average
fixed rate of %, maturing between and . These facilities are guaranteed by Export-Import Bank of the United States (Ex-Im Bank) and
secured by one 800-series aircraft, 700-series aircraft and 600-series aircraft.
(ii) Two individual term loans, amortized over a 12-year term, repayable in quarterly principal instalments totalling $1,613, in addition to a floating rate of
interest at the three month Canadian Dealer Offered Rate plus 75 basis points, with an effective weighted average floating interest rate of 3.17% at
December 31, 2012, maturing in 2024. The facility is guaranteed by Ex-Im Bank and secured by two 800-series aircraft.
(iii) Term loan repayable in monthly instalments of $ , including floating interest at the bank’s prime rate plus %, with an effective interest rate of
% as at December 31, 2012, with a final repayment of $35 in January 013, secured by the Calgary hangar facility.
Future scheduled repayments of long-term debt as at December 31, 2012 are as follows:
Within 1 year
164,909
1 – 3 years
302,021
3 – 5 years
172,671
Over 5 years
99,447
739,048
There are no financial covenant compliance requirements for the facilities guaranteed by the Ex-Im Bank related to aircraft
purchases.
WestJet 2012 Annual Report
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