2023 Consolidated Financial Statements and Notes
AIR CANADA
2023 Consolidated Financial Statements and Notes
The ratio of fixed to floating rate obligations outstanding is designed to maintain flexibility in the Corporation's capital
structure and is based upon a long-term objective of 60% fixed and 40% floating but allows flexibility to adjust to
prevailing market conditions. The ratio at December 31, 2023 is 75% fixed and 25% floating (71% and 29%, respectively
as at December 31, 2022).
Share-based Compensation Risk
The Corporation issues RSUs and PSUs to certain of its employees, as described in Note 13, which entitles the
employees to receive a payment in the form of one share, cash in the amount equal to market value of one share, or a
combination thereof, at the discretion of the Board of Directors.
To hedge the share price exposure, the Corporation entered into share forward contracts to hedge PSUs and RSUs
that vested in 2023. The forward dates for the share forward contracts coincided with the vesting terms and planned
settlement dates of 325,000 PSUs and RSUs in 2023. These contracts were not designated as hedging instruments
for accounting purposes. Accordingly, changes in the fair value of these contracts are recorded in Gain (loss) on
financial instruments recorded at fair value in the period in which they arise. During 2023, a gain of less than $1 million
was recorded (2022 - loss of less than $1 million). Share forward contracts cash settled with a fair value of $6 million
in favour of the Corporation in 2023 (2022 - $7 million). There are no share forward contracts outstanding as at
December 31, 2023.
Credit Risk
Credit risk is the risk of loss due to a counterparty's inability to meet its obligations. As at December 31, 2023, the
Corporation's credit risk exposure consists mainly of the carrying amounts of cash and cash equivalents, short-term
investments, accounts receivable, long-term investments and derivative instruments. Cash and cash equivalents and
short and long-term investments are in place with major financial institutions, various levels of government in Canada,
and major corporations. Accounts receivable are generally the result of sales of passenger tickets to individuals, largely
through the use of major credit cards, through geographically dispersed travel agents, corporate outlets, or other
airlines. Similarly, accounts receivable related to cargo revenues relate to accounts from a large number of
geographically dispersed customers. Accounts receivable related to agreements for the issuance of Aeroplan Points
are mainly with major financial institutions and any exposure associated with these customers is mitigated by the
relative size and nature of business carried on by such partners. Credit rating guidelines are used in determining
derivative counterparties. In order to manage its exposure to credit risk and assess credit quality, the Corporation
reviews counterparty credit ratings on a regular basis and sets credit limits when deemed necessary.
Sensitivity Analysis
The following table is a sensitivity analysis for each type of market risk relevant to the significant financial instruments
recorded by the Corporation as at December 31, 2023. The sensitivity analysis is based on certain movements in the
relevant risk factor. These assumptions may not be representative of actual movements in these risks and may not be
relied upon. Given potential volatility in the financial and commodity markets, the actual movements and related
percentage changes may differ significantly from those outlined below. Changes in income generally cannot be
extrapolated because the relationship of the change in assumption to the change in income may not be linear. For
purposes of presentation, each risk is contemplated independent of other risks; however, in reality, changes in any one
factor may result in changes in one or more several other factors, which may magnify or counteract the sensitivities.
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