2023 Consolidated Financial Statements and Notes
AIR CANADA
2023 Consolidated Financial Statements and Notes
The sensitivity analysis related to derivative contracts is based on the estimated fair value change applicable to the
derivative as at December 31, 2023 considering a number of variables including the remaining term to maturity and
does not consider the fair value change that would be applicable to the derivative assuming the market risk change
was applicable to the maturity date of the derivative contract.
Interest rate risk
Income
Foreign exchange rate risk (1)
Income
Other price risk(2),(3)
Income
1%
(Canadian dollars in millions)
increase
1%
decrease
5%
increase
5%
decrease
10%
increase
10%
decrease
Cash and cash equivalents
$
28
$ (28)
$
(21) $
21 $
EA
$
Short-term investments
$
57
Long-term investments
$
7
$
བཐ
$ (57) $
(32)
$
32
FA
$
(7)
$
(3)
$
3
$
SA
A
Aircraft related deposits
$
$
$
(2)
$
2
$
FA
EA
Long-term debt and lease
liabilities
$
(33)
$
33
$
517
$
(517)
$
Foreign exchange derivatives
$
Embedded derivative on
$
convertible notes
SA
.
$
SA
$
(8)
$
8
$
EA
$
$
EA
$
SA
(6)
$
6
(1) Increase (decrease) in foreign exchange relates to a strengthening (weakening) of the Canadian dollar versus the U.S. dollar.
The impact on long-term debt and lease liabilities includes $6 million related to the Canadian dollar versus the Japanese yen.
The impact of changes in other currencies is not significant to the Corporation's financial instruments.
(2) The sensitivity analysis for the embedded derivative on the convertible notes is based on a total 10% change in value.
For Air Canada's equity investment in Chorus, a 10% increase (decrease) to the Chorus share price would increase
(decrease) Other comprehensive income by $4 million.
Covenants in Credit Card Agreements
The Corporation's principal credit card processing agreements for credit card processing services contain triggering
events upon which the Corporation is required to provide the applicable credit card processor with cash deposits. The
obligations to provide cash deposits and the required amount of deposits are each based upon a matrix measuring, on
a quarterly basis, both a fixed charge coverage ratio for the Corporation and the unrestricted cash and short-term
investments of the Corporation. In 2023, the Corporation made no cash deposits under these agreements (nil in 2022).
Financial Instrument Fair Values in the Consolidated Statement of Financial Position
The carrying amounts reported in the consolidated statement of financial position for short-term financial assets and
liabilities, which includes Accounts receivable and Accounts payable and accrued liabilities, approximate fair values
due to the immediate or short-term maturities of these financial instruments. Cash equivalents and short and long-term
investments are classified as held for trading and therefore are recorded at fair value.
The carrying amounts of derivatives are equal to fair value, which is based on the amount at which they could be settled
based on estimated current market rates.
Management estimated the fair value of its long-term debt based on valuation techniques including discounted cash
flows, taking into account market information and traded values where available, market rates of interest, the condition
of any related collateral, the current conditions in credit markets and the current estimated credit margins applicable to
the Corporation based on recent transactions. Based on significant unobservable inputs (Level 3 in the fair value
hierarchy), the estimated fair value of debt is $10,975 million compared to its carrying value of $11,455 million.
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