AWAS Annual Report 2014

Transcription

ANNUAL REPORT
AND FINANCIAL
STATEMENTS 2014
Headquarters
Block B,
Riverside IV,
Sir John Rogerson’s Quay,
Dublin 2,
Ireland.
T: + 353 1 635 5000
F: + 353 1 635 5001
Singapore Office
435 Orchard Road,
#10-02/03 Wisma Atria,
Singapore 238877.
T: + 65 6690 9280
F: + 65 6690 9281
Miami Office
801 Brickell Avenue,
Suite 800,
Miami,
Florida 33131,
USA.
T: + 1 305 530 3800
F: + 1 305 530 3801
www.awas.com
ANNUAL REPORT AND FINANCIAL STATEMENTS 2014
New York Office
444 Madison Avenue,
4th Floor,
New York NY10022,
uSA.
T: + 1 212 782 3360
F: + 1 212 782 3366
AWAS – made to measure
Over
$1.1bn
of Revenue
Over
$1bn
of EBITDA
Over
300
Aircraft
Over
$11.7bn
of Assets
Contents
AWAS Customer Relationships
2
ANN UA L R EP OR T A ND F I NA NCI A L S TAT EM ENTS 2014
AWA S AV IAT IO N C A P ITA L L IMI TED
4
About AWAS
10
AWAS Overview
12
AWAS Strategy and External Business Overview
15
Financial Overview
18
Corporate Social Responsibility
26
Environmental Responsibility
28
AWAS People
29
Board Governance and Committees
30
AWAS Compliance Programme 37
Financial Statements
38
AWAS AV I ATI ON C AP I TAL L I M I TED
ANNUAL RE PO R T AND FINANC IAL STATE ME NTS 2 0 1 4
3
AWAS Customer Relationships
Growing via accretive acquisitions in the
secondary market
AWAS is an industry leader in aircraft trading and for the
past four years has successfully and profitably grown its
portfolio via acquisitions in the secondary market. AWAS
works with its global airline customers to purchase new,
modern technology aircraft that they had previously
ordered directly from the manufacturer. As part of the
transaction, the aircraft is then placed on long-term lease
with the airline (Purchase Lease Back “PLB”). AWAS also
purchases bespoke portfolios of value accretive aircraft
directly from other lessors.
AWAS also continues to purchase bespoke portfolios of
aircraft from other lessors looking to manage their airline
and/or jurisdictional risk. AWAS’ established global platform
and risk modelling expertise allows it to be a leader in
the acquisition of aircraft already on lease to strong airlines. In 2014 AWAS transacted 10 aircraft purchase and
leasebacks with airlines and added another 18 aircraft
purchased from other lessors. Over the past two years the
average age of aircraft purchased by AWAS in the secondary
market has been approximately three years of age.
Working with global leaders in their field
Established in 1970, Cargolux is Europe’s largest all-cargo
airline and is considered one of the pre-eminent freight
airlines in the world. Its mission is to move valuable
and time-sensitive commodities on its well-established
worldwide network covering over 90 destinations. Cargolux
has more than 85 offices in over 50 countries.
AWAS has been working with Cargolux since 2006 providing
it with the modern, efficient dedicated cargo aircraft that it
demands. The purpose-built 747-400 freighters that AWAS
leases to Cargolux are some of the most desirable in the
world with their nose-loading capability for outsized cargo
and superior tonnage capacity and nautical mile range
allowing them to fly non-stop from the business trade hubs
in Asia to Europe, North America, and South America.
Dirk Reich, CEO, Cargolux, “AWAS has proven itself to be a
strong and flexible partner for Cargolux. Their team keeps a
consistent dialogue with us and is interested in not just what
they can do for us today, but demonstrates a longer-term
view on how we can profitably grow together into the future.”
AWAS has delivered innovative and flexible solutions to
support Cargolux through various economic environments. With global trade on the upswing, and the air cargo market
returning to more sustained growth, Cargolux is well
positioned to capitalise on this trend.
Delivering more complex and
customised solutions
AWAS and Ethiopian Airlines, the flag carrier of Ethiopia
which recently celebrated 70 years in service, have had a
strong and growing relationship for 16 years.
In 2014 AWAS struck a deal to provide a fleet upgrade
solution where AWAS would purchase three new 737-800
passenger aircraft that the airline had previously ordered
directly from the manufacturer, and then lease them back to
the airline. AWAS would also assist Ethiopian with the fleet
transition of two 767-300ER wide-body passenger aircraft
that no longer met its longer-term business plans. AWAS’
strong, established technical team, global, varied customer
base of over 100 airlines and expertise with mid-life aircraft
was a significant asset in securing this opportunity.
Tewolde Gebremariam, CEO Ethiopian Airlines remarked at
the time, “Once again we have turned to our trusted partner
AWAS, who has worked closely with us to craft this customised
solution to assist with our fleet modernisation and expansion
plans, in line with our Vision 2025 strategic roadmap.”
4
5
Capitalising on strong regional growth,
developing relationships for today and
the future
In 2014 AWAS successfully expanded its relationship with
PT Lion Mentari Airlines (Lion Air) with the lease of three
new 737-800s and one Airbus A320. The airline had
purchased these aircraft directly from their respective
manufacturers. AWAS agreed to provide a financing solution
for all four aircraft and then to place them on long-term
leases with Lion Air.
AWAS had earlier in 2014 purchased two modern 737-800s
leased to Lion Air from another lessor. The expertise and vision to discover the
next generation of successful airlines
AWAS has a proven track record of identifying newer airlines
with strong business models, supporting them early on,
and then growing successfully with them as they expand
and thrive. VietJet, based in Ho Chi Minh City, Vietnam, is a
strong example of that core competency in action. The airline is a successful and expanding low-cost carrier
operating a modern, all-A320 fleet from Vietnam's three
major economic and tourist hubs (Ho Chi Minh City, Da
Nang and Hanoi.) It is also the first private airline in Vietnam
to be licensed to operate domestic and international flights.
6
At the time of the deal, Mr. Rusdi Kirana, CEO of Lion Group
stated, “We are very pleased to expand our relationship with
AWAS. Their team has proved to us that they operate a very
customer-centric and flexible model, focused on helping
Lion Air with our planned expansion and growth across
the group. AWAS took the time to understand our unique
business model and provide the flexibility we require.”
Lion Air launched in Indonesia in 2000 with one aircraft.
Today, the Lion Group flies to more than 36 cities in
Indonesia and international destinations, including
Singapore, Malaysia and Vietnam.
In 2013 AWAS first agreed with VietJet, which launched in
late 2011, to the lease of three new A320 passenger jets
from AWAS’ new order pipeline. Based on the profitable
growth and strong performance of VietJet, in 2014 AWAS
leased the airline a further new A320 from our order
pipeline.
VietJet Air roughly doubled its fleet and traffic in 2014,
ending the year with six million passengers and almost 20
aircraft. In 2015 VietJet is seeking to increase its existing 30%
share of the Vietnamese domestic market while launching an
international service to China and Japan. AWAS looks forward
to many years of profitable partnership and growth with
VietJet.
7
Key lessor to a global airline’s launch of
lower-cost leisure carrier
Two 767-300ER aircraft on lease from AWAS helped to
launch Air Canada’s lower-cost leisure carrier, “Air Canada
rouge,” in 2013. These AWAS 767s leased to Air Canada
were among the initial aircraft to transfer from the mainline
carrier to the start-up of the new operation. A further A319
was leased to Air Canada to also be operated by rouge.
As Air Canada’s mainline fleet continues to grow, two
additional 767-300ER aircraft from AWAS are planned to
deliver to Air Canada in 2015. These aircraft will further
support the growth of the Air Canada rouge fleet. Critical
to meeting Air Canada’s expectations is on-time delivery of
Assisting a customer with the launch of
transatlantic travel
AWAS began its relationship with Boliviana in 2009 with the
placement of one mid-life narrow-body aircraft. Since that
time AWAS has grown with Boliviana, providing additional
aircraft to meet the expansion requirements of the airline’s
route network to additional international destinations
including Sao Paulo, Buenos Aires, as well as six domestic
destinations, from its hub in La Paz.
In 2014, after discussions and consultation with the airline
between their fleet team and the AWAS Commercial and
Technical teams, an exciting and creative agreement was
struck for multiple wide-body aircraft to enable Boliviana to
launch a transatlantic service from Cochabamba to Madrid,
Spain, as well as to Miami in the US.
8
aircraft that meet the airline’s exacting standards. AWAS has
executed on both fronts. Our diversified aircraft portfolio
and ability to respond to demanding delivery schedules
have enabled AWAS to win repeat business at Air Canada.
The strategic deployment of Air Canada rouge has been a
strong success. The new leisure airline serving holiday spots
in Europe, the Caribbean, the United States and Canada,
has proven to be very popular. In 2014, rouge contributed
to Air Canada’s best full-year financial performance in the
corporation’s 77-year history. AWAS is pleased to have
played a supporting role in that outstanding achievement.
AWAS would provide three 767-300ER wide-body extended
range aircraft to Boliviana. Two of the three aircraft would
be placed into immediate service to launch the Miami and
Madrid destinations, while the third was allocated for the
provision of spare engine and parts support to the fleet. These routes represent important natural markets for the
airline and will allow significant improvement of services as
well as travel options for the Bolivian passenger.
Ronald Casso, CEO of Boliviana stated at the time of the
agreement, “We are very excited about this important step
being taken by Boliviana today and we greatly value the
ability of the AWAS team to focus on providing complete
solutions for our growth plans and to support our expansion
into wide-body long-haul service.”
9
About AWAS
AWAS head office is in Dublin, with
offices in New York, Miami and
Singapore.
AWAS is one of the largest aircraft leasing companies in
the world with a total fleet of 314 aircraft (including four
aircraft on finance lease), with a book value of $10.7 billion,
managed by a highly experienced team of commercial
aviation industry professionals and serving every
developed global aviation market.
2014 has been another exciting year for AWAS. We acquired
61 aircraft during the year, with a strong performance
driven both by pipeline deliveries, but also by acquisition
in the secondary markets where we had a record year in
terms of both the number and value of aircraft acquired. The AWAS fleet grew to 314 aircraft in 2014, from 266 at the
end of 2013, a net increase of 48 aircraft in the AWAS fleet,
following acquisitions and disposals. This resulted in strong
growth in key metrics in 2014, with revenue exceeding
$1billion, and EBITDA over $1 billion for the first time.
Since the acquisition of AWAS by Terra Firma in 2006, total
aircraft assets cumulative annual growth rate has increased
by over 21% from $2.3 billion to $10.7 billion, with the
AWAS fleet growing from 156 aircraft to 314 aircraft. At the
same time, we have placed over 100 pipeline deliveries
from Airbus and Boeing, reduced the average age of the
AWAS fleet from 12.1 years to 4.9 years, and extended the
average remaining lease term from 3.1 years to 5.8 years. We have worked with our shareholders, Terra Firma and
Canada Pension Plan Investment Board (CPPIB), to
re-engineer AWAS into a world-class commercial aircraft
leasing platform. Our business is known today around the
globe for innovation and a dedication to customer service
delivering customised solutions. 10
Pursuant to our strategy of focusing on high yield
opportunities, in early March 2015, we announced, along
with our shareholders, the sale of a portfolio of up to 90
aircraft by AWAS to Macquarie, for a consideration of US$4
billion. This portfolio had been acquired predominantly
over the past two years and includes mainly narrow-body
aircraft. The portfolio comprises 62 Airbus A320 family,
24 Boeing 738 family and 4 Airbus A330s. At the end of
November there were 11 forward order aircraft in the
portfolio.
The sale of this portfolio is expected to close within 12
months from March 2015 and is subject to customary
closing conditions.
The strategy of AWAS will remain unchanged going
forward, to lease aircraft across a wide variety of models
and vintages to the customer base, thereby generating
market leading returns for our shareholders. After the sale of this portfolio of up to 90 aircraft AWAS will
have, on a pro-forma basis at the end of November 2014,
a total fleet of 235 aircraft with an average age of 6.2 years,
and 99 customers. This fleet will continue to deliver strong
operating cash flows and earnings for AWAS, and of course
we will continue to invest in growing the portfolio going
forward where we see attractive opportunities.
AWAS will continue to own and maintain the core of its
remaining diversified portfolio of 235 modern aircraft and
plans to grow its fleet through sale-leaseback transactions
with airlines and secondary market aircraft purchases. This
sale is part of our strategic plan and will allow us to move
into our next phase of planned growth. We look forward
to another exciting year ahead for AWAS.
11
AWAS Overview
2014 highlights
Aircraft types as a % of NBV
AWAS is one of the largest aircraft leasing companies in the
world with a total fleet of 314 aircraft with a book value of
$10.7 billion.
AWAS total assets have grown 70% since 2010, from $6.9
billion to $11.7 billion. Total equity has increased by 47% to
$3.1 billion.
The strategic focus of AWAS remains on prudent growth.
This strategy involves the proactive management of
our portfolio along with maintaining diverse sources of
financing at attractive rates.
Average age (weighted CMV)
B757/767 3%
B777 2%
B747 2%
Other 1%
B737 NG 31%
A319/320
/321 43%
B737
Classic 1%
Our continued growth is underpinned by a number of
different acquisition channels from which AWAS acquired
over $1 billion of aircraft in 2014:
• our new order pipeline from Airbus and Boeing, from
Other 1%
Airbus 60%
• a total of 28 aircraft acquired from other lessors and
airlines. This is a mix of PLB with airlines (acquired 10
aircraft); and the purchase of aircraft from other lessors
(secondary markets) acquired 18 aircraft.
lesseenov 2014
Singapore Airlines
5.1%
Qantas3.6%
Hawaiian Airlines
3.3%
Korean Air
2.9%
VRG Linhas Aereas
2.6%
Top 5 Customers – Total
2010
2011
2012
2013
2014
In addition to our current fleet, AWAS has orders for 16 new,
fuel-efficient aircraft from Airbus, 14 of which are due to
deliver during the year ended 30 November, 2015. AWAS
also has commitments to purchase four aircraft from airlines,
which are due to deliver during 2015.
A330 17%
whom we took delivery of 33 aircraft in 2014 with a
further 14 aircraft due to deliver in 2015;
9–
8–
7–
6–
5–
4–
3–
2–
1–
0–
Lessee concentration (% of lease revenue)
Forward order aircraft 16 @ November 2014
17.5%
AWAS closed 110 new leasing transactions with 54
customers in 2014. In addition, 12 aircraft were sold with a
combined average age of 19 years and we received
insurance proceeds in relation to a total loss of one aircraft.
During 2014, AWAS completed $2.7 billion of financings for
the purchase of aircraft and our forward order. AWAS also
successfully refinanced the JPM Warehouse with a USD $350
million 7-year private placement. This private placement is
backed by a 10-aircraft portfolio on lease to ten airlines and
was rated BBB by S&P.
Boeing 39%
14
The AWAS fleet features a range of aircraft types, including
262 narrow-body and 52 wide-body aircraft, which are
leased to 110 lessees in 49 countries. The AWAS fleet is
getting younger and more fuel-efficient with an average
age of 4.9 years, compared to 5.6 years at the end of 2013.
2
Wide-body 25%
Narrow-body 75%
2015
2018
The AWAS lease portfolio is highly diversified geographically
and by airline, with the top five lessees representing 17.5%
of the portfolio based on lease revenue as of 30 November,
2014. Singapore Airlines is our largest customer at 5.1% of
the total portfolio based on lease revenue. Our leases with
airline customers for new aircraft are generally signed up to
12 months prior to the scheduled aircraft completion and
delivery by the manufacturer.
12
13
AWAS Strategy and External Business Overview
At AWAS our mission is to be the leading provider of
aviation fleet management and finance solutions to airlines
worldwide.
We believe AWAS is exceptionally well positioned to
continue to deliver on this mission due to our proven
business model, our range of customer solutions, and the
expertise of our people. We bring to our customers a
customised, solutions-oriented approach to aircraft leasing,
financing and fleet management.
The strategic focus of AWAS remains on prudent growth
that maximises the value of the company. We have a flexible
and dynamic portfolio management strategy that takes into
consideration all of the opportunities available in the market
for AWAS to invest in and divest of aircraft assets. Our
business model allows us to originate transactions and
manage leases across a broad range of aircraft types, ages
and customer credits, while providing varied and complete
solutions to our global airline customer base.
All leasing, financing and asset trading decisions are
managed with a rigorous and investment-led approach. We
assess each opportunity individually in order to meet
customer requirements in the context of our return on
investment targets.
The AWAS approach focuses on risk-adjusted return on
equity, residual asset values, credit risk, as well as optimising
the underlying capital structure within the framework of
maintaining diverse sources of finance.
We will continue to actively manage our aircraft lease
portfolio by adjusting marketplace concentration, portfolio
and lease contract value optimisation, and managing our
asset mix to achieve an optimised rate of risk-adjusted
return. This portfolio strategy is complemented by proactive
asset trading based on prevailing market conditions.
14
General macroeconomic environment
summary
The global economy grew at a modest rate in 2014, with
stronger growth in certain regions offset by weaker growth
in others. High-income countries displayed uneven
recovery, as the United States and the United Kingdom
outperformed while others still struggle with the legacies of
the global financial crisis. Some signs of improvement have
emerged more recently and overall. Global growth is
expected to rise moderately in 2015, with the January 2015
World Bank forecast predicting growth of 3.0% for the year.
Prospects differ across both advanced and emerging
economies. In the advanced economies, growth is set to
remain stronger in the United States and the United
Kingdom than in the Euro area and Japan. In the emerging
market economies, the OECD predicts growth will edge
down in China, remain weak in Russia and Brazil, but will
recover steadily in India, Indonesia and South Africa. World
trade is expected to receive a boost from lower oil prices
but is still expected to grow at a slower rate than prior to
the financial crisis.
Airlines
The airline industry in 2014 is forecast to post its largest ever
absolute profit of $20 billion, according to the International
Air Transport Association (“IATA”). Global air travel increased
by 5.9% in 2014, above its 10-year average growth rate of
5.6%, and industry load factors reached 79.7% in 2014,
driven by stronger growth in demand than expansion in
available seats. Weaker carriers received a significant windfall
from the decline in fuel prices, however, this has not yet had
a significant effect on industry leaders with the impact of
fuel hedging reducing any short-term gains, and the
strength of the US dollar also diminishing gains to non-US
based carriers. International travel rose by 6.1%, slightly
below the 10-year growth rate of 6.3%, influenced by signs
of a slowdown in regional production activity in Asia Pacific
and adverse economic developments in parts of Africa.
This was offset by a solid performance in other regions
with the Middle East recording the strongest increase, up
13% in 2014.
15
European airlines saw an increase in international traffic of
5.7% while North American airlines saw growth of 3.1%.
Globally, domestic passenger travel increased by 5.3% in
2014, with China, Russian and India all performing well
while Japan and Australia underperformed during the year.
The overall strength of the financial and performance
indicators translated into an increase in worldwide airline
share prices, which were up 40% in December 2014
compared with the start of 2014.
The variation in regional growth in 2014 fed through to the
air cargo market. After a weak start to the year there was a
marked acceleration during the second half of 2014,
particularly in Asia Pacific and the Middle East. Airlines in
these regions carried 46% and 29% of the expansion in
global freight tonne kilometres (FTKs) respectively. While
Europe and Latin America remained relatively weak during
the year the improvements in air freight demand in other
regions are showing no slowdown. Overall volumes
expanded by 4.5% during the year, however, air freight load
factors remain weak and the values of wide-body freighters
remain depressed.
The latest IATA 2015 forecast predicts record profits of
$25 billion for the year and global commercial airline
revenue to increase by 4.2%. The fall in the price of fuel is
expected to lead to cheaper airfares for consumers and
should help to support economic activity and passenger
demand. IATA expects that commercial airlines will take
delivery of more than 1,700* new aircraft in 2015,
representing an investment by the industry of around $180
billion. Air travel is forecast to increase by 7% in 2015, the
best growth rate since 2010, while cargo is also expected to
see reasonable growth. Lower oil prices and stronger
worldwide GDP growth are the main drivers behind the
growth, however, the aviation industry remains vulnerable
to external shocks.
AWAS employees
Leasing market
Outlook
The global aircraft fleet continues to grow steadily and
leasing continues to play an important role, financing
approximately 42%** of the current fleet. The current
environment is a favourable one for lessors with continuing
growth in international and domestic travel driving demand
for both used and next-generation aircraft. Asset utilisation
is high, aircraft useful lives are improving and airlines are
working to extend their existing leases as they continue to
add capacity. The medium-term fuel outlook will most likely
have an impact on airline fleet retirements as it becomes
more economical to operate aircraft for longer, which is
good for the industry and existing lease rents. Order
backlogs are at an all-time high, with more aircraft to finance
than at any other time in history, and the commercial aircraft
leasing market looks set to remain strong.
We believe 2015 will see continued growth in the air
transportation market driven by continued growth in global
GDP and lower average fuel prices. AWAS plans to continue
investing in secondary aircraft acquisition channels and
through ongoing delivery of our new order pipeline with
Airbus. AWAS will also continue to make targeted
divestments through end-of-life processes, bilateral and
large portfolio sales as market conditions and our portfolio
strategy warrant.
References
OECD – General assessment of the macroeconomic
situation
IATA Economic Performance of the Industry End Year 2014
Report
*http://www.iata.org/pressroom/pr/Pages/2014-12-10-01.
aspx (10 December)
**Source: Ascend Mar 2015 – Leased Summary Share,
Western Built Jets, NB and WB included, RJ excluded, Pax
Usage Only, In Service Only
16
17
Financial Overview
Consolidated statement of
comprehensive income (USD $m) FYE 2014
FYE 2013
Total revenue 1,176.9
1,074.7
Total expenses
(526.3)
(503.2)
Results from operating activities
before impairment
650.6
571.5
Asset impairment
(82.1)
(191.3)
568.5
380.2
(346.5)
(294.2)
Tax expense
(35.3)
(13.6)
Profit after tax
186.7
72.4
Total other comprehensive income
168.4
84.5
FYE 2014
FYE 2013
186.7
346.5
72.4
Net finance costs Adjusted EBITDA (USD $m)
Net profit
Add back
Net finance costs
Tax
Depreciation and amortisation
Asset impairment
Adjusted EBITDA
294.2
35.313.6
430.5
379.2
82.1
191.3
1,081.1
950.7
OPBT (USD $m)
FYE 2014
FYE 2013
Net profit
186.7
72.4
Add back
Tax
35.313.6
Asset impairment
82.1
191.3
Internal interest on shareholder loans 24.5
26.5
Unrealised gain /(loss) on the fair
value of derivatives 4.0 (3.8)
Operating Profit before Tax
332.6
300.0
AWAS ended the year with total cash and cash resources of
$479.4 million, which represents an increase of $36.8 million
(2013: $442.6 million).
Revenues
Total revenue increased 9.5 % to $1,176.9 million for 2014
(2013: $1,074.7 million), driven primarily by an increase in
lease revenue as detailed below.
Revenue analysis (USD $m)
AWAS generated results from operating activities before
impairment of $650.6 million (2013: $571.5 million) an
increase of 13.8%. This was due to strong revenue growth
driven by aircraft deliveries and acquisitions, and gains on
disposal of aircraft offset by increased depreciation and
amortisation. Adjusted EBITDA measured by profit excluding
net finance costs, tax expense, depreciation and
amortisation, and impairment increased by 13.7% to
$1,081.1 million in 2014 compared to $950.7 million in 2013.
AWAS’ Operating Profit before Tax (OPBT) of $332.6 million,
measured by Profit before Tax and Impairment excluding
internal interest, other expenses and fair value on
derivatives (MTM), was an increase on the prior year figure
of $300.0 million. OPBT has grown 73.9% since 2010.
FYE 2014
FYE 2013
Lease revenue
Maintenance revenue
Lease incentive amortisation
Amortisation of intangibles
1,125.6 46.0 (21.5)
(7.5)
976.4
78.9
(8.9)
0.0
Total lease revenue
Other income
1,142.6 34.3 1,046.4
28.3
Total revenue
1,176.9
1,074.7
Total lease revenue increased to $1,142.6 million for 2014
(2013: $1,046.4 million) due to additional revenue from the
purchase of aircraft offset by decreased maintenance
revenue and increased lease incentive amortisation costs.
Lease revenue increased to $1,125.6 million in 2014 (2013:
$976.4 million), due to additional revenue from the
acquisition of 61 aircraft (33 from our forward order and 28
acquired from other lessors and airlines).
Maintenance revenue decreased to $46.0 million for 2014
(2013: $78.9 million). The decrease was due to lower releases
of maintenance associated with the transition of aircraft,
lower end-of-lease compensation adjustments received and
lower maintenance advances.
Amortisation associated with lease incentive assets increased
to $21.5 million (2013: $8.9 million). This was due to an increase
in amounts expected to be paid by AWAS on future
maintenance events.
18
Simon Glass, CFO
Amortisation of intangibles was $7.5 million (2013: nil).
This increase was due to the recognition of lease intangibles
in relation to the acquisition of aircraft that were purchased
on lease. Lease intangibles amounts were also reclassified
on aircraft acquired on lease in the prior year to reflect
this treatment.
Other income, which relates mainly to non-recurring events,
increased to $34.3 million for 2014 (2013: $28.3 million).
Other income in the year ended 30 November, 2014
includes proceeds from the sale of securities of $21.6
million, which previously formed part of available-for-sale
securities and were recognised in other comprehensive
income. During the year ended 30 November, 2013,
proceeds from available-for-sale securities totalled $14.6
million. The remaining increase year-on-year was due to the
sale of spare parts.
19
Expenses
Expenses (USD $m)
FYE 2014
FYE 2013
(430.5)
Gain on disposal of aircraft
17.5
Loss on transfer to held-for-sale
0.0
Loss on transfer to finance lease receivable (0.5)
(18.8)
Aircraft maintenance expenses
General and administrative expenses
(94.0)
(379.2)
1.5
(3.8)
(5.9)
(25.5)
(90.3)
Total expenses
(503.2)
(526.3)
Profit after tax for 2014 was $186.7 million (2013:
$72.4 million).
Freighters 80%
Passenger 20%
Other comprehensive income was an expense of $18.3
million for 2014 (2013: Income of $12.1 million) and relates
to the fair value of assets available-for-sale net of tax.
before impairment and results from
operating activities
Results from operating activities before impairment
increased 13.8% to $650.6 million for 2014 (2013: $571.5
million). This was due to strong revenue growth driven by
aircraft deliveries and acquisitions, and gains on disposal of
aircraft offset by increased depreciation and amortisation.
Statement of financial position
and cash flows
Finance costs
Depreciation and amortisation increased in 2014 to $430.5
million (2013: $379.2 million), due mainly to increased
charges relating to additional aircraft acquisitions. There was
a gain on the disposal of aircraft in 2014 of $17.5 million
(2013: $1.5 million). During 2014, AWAS sold 12 aircraft and
received insurance proceeds in relation to the total loss of
one aircraft (2013: 20).
Loss on transfer to held-for-sale on three aircraft was nil
(2013: $3.8 million on 5 aircraft). A loss of $0.5 million was
also recognised on the transfer of four aircraft to finance
lease receivable during 2014 (2013: $5.9 million). Aircraft
maintenance expenses were $18.8 million in 2014 (2013:
$25.5 million). General and administrative expenses
increased to $94.0 million for 2014 (2013: $90.3 million), due
to increased legal costs and compensation and benefit
costs during the year.
In 2014 the tax expense was $35.3 million (2013: $13.6
million). The effective tax rate for 2014 was 15.9%
(2013: 15.9%).
Other comprehensive income
Total expenses for 2014 increased by 4.6% to $526.3 million
(2013: $503.2 million), due primarily to increased depreciation
and amortisation, offset by gains on disposal of aircraft.
20
Profit
Asset impairment charge FYE 2014
Net finance costs increased 17.8% to $346.5 million for 2014
(2013: $294.2 million). This was due to increased interest
associated with higher loan balances, unfavourable
movements in the fair value of derivatives and higher
financing fee amortisation associated with higher loan
balances.
Statement of financial
position (USD $m)
FYE 2014
FYE 2013
Total cash and cash resources
Property, plant and equipment 479.4
10,674.4
442.6
8,628.4
Total assets 11,720.4
10,253.3
Total equity
Total loans and borrowings 3,130.8
7,271.6
2,945.5
6,212.4
Total equity and liabilities 11,720.4
10,253.3
AWAS offices
Results from operating activities were $568.5 million for
2014 (2013: $380.2 million) reflecting a decrease in
impairment recognised in 2014. In 2014, we recorded a
non-cash impairment charge of USD 82.1 million. The
recoverable amounts for these assets after impairment is
USD 436.1 million. The recoverable amount has been
determined on the basis of value in use. The impairment
charge was taken primarily on wide-body freighter aircraft. The average age of the aircraft impaired was 16 years (2013:
$191.3 million).
21
Statement of financial position
and cash flows
Total assets increased to $11,720.4 million as at 30
November, 2014, from $10,253.3 million as at 30 November,
2013. This increase was due primarily to the acquisition of 61
aircraft during the year. At the end of 2014 there are 314
aircraft in the fleet (2013: 266).
Our total cash and cash resources, at 30 November, 2014
was $479.4 million (2013: $442.6 million). This includes
restricted cash of $144.9 million and short-term investments
of $104.7 million, of which all are restricted.
Cash flows from operating activities were $1,270.5 million,
(2013: $985.3 million). Net cash used in investing activities
was $2,017.8 million in 2014 (2013: $1,846.6 million). Capital
expenditure for 2014 was $1,896.4 million, and related to
the purchase of 61 aircraft and includes the remaining
interest in 10 aircraft acquired during 2013 (2013: $1,741.3
million total purchased: 45 aircraft and an initial interest in
10 aircraft). Proceeds from sale decreased to $101.2 million
on the sale of 12 aircraft and total loss of one aircraft in 2014
(2013: $226.3 million). Deposits paid for aircraft have
decreased to $173.2 million for 2014 (2013: $311.1 million).
Cash flow from financing activities in 2014 was a net cash
inflow of $734.3 million (2013: $605.1 million). This was due
primarily to higher drawdown of financings for new aircraft,
higher refinancing of aircraft and pre-delivery payments
during 2014.
22
Liquidity and capital resources
Historically, we have financed our operations through a
mixture of equity and debt, comprising of lines of credit,
loan facilities and Senior Secured Notes. Our third-party
indebtedness increased to $7,271.6 million as at 30
November, 2014 (2013: $6,212.4 million). Our total equity
increased to $3,130.8 million in 2014 (2013: $2,945.5 million).
Our Debt to Equity ratio was 2.3:1 times in 2014 (2013:
2.1:1 times).
In 2014 the total share capital in AWAS was $1,723.2 million.
Additional Paid In Capital was $424.2 million in 2014, which
relates to interest-free loans from Carmel Capital which are
repayable, to the extent outstanding, from 2058 to 2063.
The interest-free loans have been recorded at their fair value
and the difference between their face value and fair value is
reflected as a credit to other reserves, representing a
contribution from the shareholder.
Risk management
The principal risks facing the business are set out in note 27
of the consolidated financial statements.
Signed
/s/ Simon Glass
Simon Glass
Chief Financial Officer
May 2015
23
Adjusted EBITDA (in millions USD)
Total revenue (in millions USD)
: 12.6%
CAGR
4
1
0
2
2010$997
$1,075
$733
2010
$777
2011
2012
2013
: 14.4%
CAGR
4
1
0
2
2010$951
$874
$1,177
2014
Results from operating activities before
impairment (in millions USD)
$632
$699
2010
2011
$651
24
$405
$441
2010
2011
2012
$572
2013
$6,885
2012
2013
2014
2014
$722
2010
1.8%
AGR: 1
C
4
1
20
2010$976
$879
$769
2011
2012
2013
Medium and long-term debt (in millions USD)
2010
$7,272
$7,804
2011
2012
2013
2014
Total equity (in millions USD)
$3,734
$4,138
2010
2011
$2,218
$2,507
2010
2011
$2,842
$2,946
2012
2013
$5,294
$6,212
2012
2013
2014
Operating cash flow (in millions USD)
5.3%
AGR: 1
C
4
1
20
2010-
0.1%
AGR: 1
C
4
1
20
2010-
$1,126
2014
: 18.1%
CAGR
4
1
0
2
2010-
: 14.2%
CAGR
4
1
0
2
$11,720
2010$9,214 $10,253
$1,081
Lease revenue (in millions USD)
2.6%
AGR: 1
C
4
1
20
2010-
$553
Total assets (in millions USD)
$3,131
$720
$803
2014
2010
2011
$946
$985
2012
2013
$1,271
2014
25
Corporate Social Responsibility
Pentathlon Ireland
The AWAS Mission for Vision Ball, held annually in Dublin,
raised a record €215,000 ($243,000) for Orbis Ireland in
January 2015, bringing the total funds raised since the ball’s
inception to over €1 million. This is the seventh year AWAS
has hosted the AWAS Ball, covering the full cost of the ball
and allowing all contributions to go directly to support the
vital work of the charity. The ball coincides with the very
well attended annual Annual Global Airfinance Conference
in Dublin.
Established in 2005, Orbis Ireland is focused on one major
project, to eliminate trachoma – a
highly prevalent and life-destroying,
blinding disease in some of the
poorest regions of southern
Ethiopia. Over a third of children in
Ethiopia are affected by trachoma, a blinding yet completely
preventable eye disease. 1.2 million Ethiopians are blind,
while a further 2.7 million suffer from a visual impairment.
“It is thanks to the generosity of AWAS, and the companies
and individuals who have supported the Mission for Vision
Ball over the years, that in excess of €1 million has been
raised for Orbis Ireland’s sight-saving work. Through the
ongoing support of the aviation industry, Orbis has brought
hope to millions of people who live with the threat of
blindness," said Dr. Maurice Cox, Chairman of Orbis Ireland.
A number of AWAS staff also participated again in the
Great Ethiopian run in 2014. AWAS was also one of the key
sponsors for the cost of the trip to Ethiopia, and this ensured
that all monies raised by the participants went straight to
Orbis Ireland in helping to fight the elimination of trachoma.
©UIPM. Photographer: Eric Naples/UIPM
ORBIS and AWAS: pulling together to
battle sight-related illnesses
During 2014, AWAS continued its successful partnership
with Pentathlon Ireland (PI). Through the support of AWAS,
PI took the critical step of employing a general manager for
the first time, facilitating growth and delivering sustainability
for the organisation. Significant milestones include
the establishment of a new headquarters at the Irish National
Sports Campus, development of the only ‘5-sport’ training
venue in Europe, expansion of the PI professional staff and
the implementation of nationwide schools development and
youth participation programmes. On the international stage,
the AWAS support has helped to underpin the growth of the
PI High Performance Squad, who began their quest to qualify
for Rio 2016 with podium finishes in the first two major
international competitions of 2015. AWAS employees have
equally enjoyed the benefits of the partnership, participating
in a fencing and shooting “Sports & Social” evening at the
National Training Centre, enjoying a lunchtime talk from
London 2012 Olympian Natalya Coyle, and getting a chance
to hold the Olympic torch.
AWAS employees are proactive in their support of corporate
social responsibility initiatives and continued their support of
a number of worthy local and global causes in 2014. A few of
the charities that AWAS sponsors are profiled below.
For more information on the organisation and how to help:
www.orbis.org
Supporting children and families
affected by neurological disorders
Photographer: Mel Maclaine
26
In 2014, AWAS again supported the Jack & Jill Children’s
Foundation. This foundation provides nursing care and
support for children in Ireland with severe neurological
development issues, as well as providing the Gift of Time in
the form of home respite to the parents and families. They
also provide non-oncology
end-of-life care to babies
and children up to age 4. All
donations raised by the AWAS
employees were matched by
the company.
27
Environmental Responsibility
AWAS People
AWAS continues its commitment to environmental
responsibility as an integrated element of our business
strategy. We have done this by investing in new or nearly
new commercial aircraft that offer technologically advanced
design features, which have demonstrated improved fleet
fuel efficiency and reduce harmful emissions. In addition to
working with lessees and OEMs to support the introduction
of the latest technology engines (such as IAE SelectTwo),
these features include advanced wingtip devices such as
the A320 Family sharklets and the advanced 737NG Family
scimitar winglets, all of which provide significantly improved
fuel efficiency while considerably reducing carbon dioxide
emissions. AWAS was recognised in 2014 as the first lessor to
commit to sharklet retrofit activity.
Contributing to growth and enhanced
productivity and effectiveness
sporting activities such as yoga, pilates, and tag rugby are
key features of this offering.
AWAS’ people continue to be the key differentiator for our
business. Our growth and success relies on our employees'
dedication, commitment to our customers and passion for
the aviation industry. In return, the ongoing support and
development of our employees remains a key priority.
A key part of our strategy and success in 2014 has been
enhancing our employees' productivity and effectiveness
within a high-performance work culture. In support of this,
we have redesigned our internal performance management
system with a key focus on employee behaviours –
promoting how we interact and operate as a team together.
This will continue to be a key focus in 2015 and beyond.
AWAS demonstrates commitment to environmental
responsibility in all office locations. AWAS recycles a
range of items and each office location looks at waterefficiency measures and also at ways to reduce electricity
consumption. All AWAS offices participated in Earth Hour
in March 2014; our New York and Miami offices have light
motion sensors throughout to minimise energy waste. Our
employees are encouraged to use public transportation
with tax saver commuter tickets available to all in the
Dublin office. All offices actively promote the Bike to Work
scheme whereby the bike is purchased by AWAS and the
employee pays the cost back to the company. This is a taxefficient scheme in Ireland which benefits the employer, the
employees and the environment. The Miami office building
is LEED certified (Leadership in Energy & Environmental
Design) which is a green building certification program that
recognises best-in-class building strategies and practices. It
is also a 2012 Energy Star National building.
Aircraft recycling
AWAS has adopted a comprehensive and responsible endof-life strategy for all its aircraft.
We work directly with our customers and industry
partners to recycle end-of-life aircraft to reduce waste
while maximising the remaining value of the airframe
components and engines. Engines, landing gear and
auxiliary power units from disassembled aircraft are, where
possible, put to use elsewhere within the AWAS fleet to
avoid unnecessary maintenance. Alternatively, engines are
disassembled and the parts sold to third parties through
consignment partners. The components of disassembled
airframes are sold on a consignment basis. The various
metals from the remaining fuselage are recycled for future
use. In 2014 AWAS parted out three aircraft.
In 2014 almost all employees participated in training and
professional development in various forms – employees
sharing knowledge and expertise with each other, bespoke
training internally, team off-site events, industry supported
training, manufacturer run training, 360° feedback and
management/leadership coaching. In addition, AWAS
supported 15% of employees with further education from
industry specific courses, professional qualifications to MBAs.
We are committed to supporting our employees' health
and wellbeing and this forms a significant part of our
employment benefits offering. Excellent health insurance,
health screening programmes and subsidising in-house
AWAS had 130 persons in employment at the end of
November 2014; this is split 73 males and 57 females. At the
end of November 2014, all board members were male and
of the six members of senior management, one was female.
Employees by office location
Dublin
93
Miami17
New York
9
Singapore11
Total130
Kaiori Creed and Lyn Cheung
28
29
Board Governance and Committees
The Board of Directors of AWAS Aviation Capital Limited, the holding company of the AWAS Group, meets in Dublin
approximately every other month. The Board of Directors is chaired by Dr. Werner G. Seifert and the remaining directors
(as at year-end 2014) were: Mr. Robin Boehringer, Mr. Daniel Bunyan, Mr. Marlin Dailey, Mr. Simon Glass, Mr. Hafiz Lalani,
Mr. Lorenzo Levi, Mr. Raymond C. Sisson, Mr. Steven Webber and Mr. Angus Williamson. A quorum for meetings of the
Board of Directors is two directors.
Directors’ profiles
Mr. Robin Boehringer (German)
Appointed October 2013
Non-executive Director
Mr. Boehringer is a Director with Terra Firma Capital
Partners. He has been with Terra Firma since 2009 focusing
mainly on Terra Firma’s portfolio businesses in Germany,
Tank & Rast and Deutsche Annington. Most recently, Mr.
Boehringer was involved in the IPO and final exit transaction
of Deutsche Annington and the refinancing of Tank & Rast.
Mr. Boehringer has a Master’s degree in Financial Economics
from Oxford University. Prior to joining Terra Firma, he
worked for Credit Suisse in M&A.
Mr. Marlin Dailey (US)
Appointed April 2013
Executive Director
Mr Dailey is the Chief Commercial Officer of the AWAS
Group. Mr Dailey joined AWAS from The Boeing Company
where he held a variety of executive leadership roles
spanning a 32-year career. Prior to joining AWAS, he was
President, Boeing Germany, Northern Europe, EU & Africa,
where he was responsible for developing and implementing
the company’s country, EU and regional strategies
and leading new business development and industrial
partnership opportunities. Prior to this position, Mr. Dailey
was the Executive Vice President Sales and Marketing of
Boeing Commercial Airplanes where he led global sales and
marketing efforts with direct organisational responsibility
for almost 500 professionals. Mr. Dailey was with Boeing
Commercial Airplanes Sales since 1991 after beginning his
career with Boeing in 1979 as an aerodynamics engineer. He
has a Bachelor of Science degree in aerospace engineering
from the University of Kansas and is a fellow of the Royal
Aeronautical Society.
30
Mr. Daniel Bunyan (Canadian)
Appointed October 2010
Executive Director
Mr. Bunyan is the Chief Investment Officer of the AWAS
Group. Prior to joining AWAS, he spent 10 years at Oliver
Wyman Management Consulting (formerly Mercer
Management Consulting) in its aviation practice where he
was a partner and director based in Montreal. He founded
a boutique aviation consultancy that helped airlines reduce
costs and improve operations. He was also previously Chief
Commercial Officer at AVEOS, an aviation maintenance,
repair and overhaul (MRO) company.
Mr. Simon Glass (British)
Appointed February 2011
Executive Director
Mr. Glass is the Chief Financial Officer of the AWAS
Group. Mr. Glass has over 25 years' international business
experience in banking and financial services. Before joining
AWAS, Mr. Glass was Deputy Group Finance Director of the
Royal Bank of Scotland Group PLC. Prior to that Mr. Glass
held a number of senior finance positions in the global
banking industry.
Mr. Hafiz Lalani (Canadian)
Appointed February 2011
Mr. Lalani is a Senior Principal within the Direct Private
Equity Group at CPPIB and is based in London. Prior to
joining CPPIB in February 2006, Mr. Lalani worked in the
Technology, Media & Telecom investment banking group
at CIBC World Markets in Toronto where he was involved
in the analysis and execution of capital markets and M&A
transactions across Canada.
Steve Webber, Ray Sisson, Hafiz Lalani, Simon Glass
Mr. Lorenzo Levi (Italian)
Mr. Levi is an Operational Managing Director at Terra
Firma Capital Partners. He has been closely involved in the
AWAS business since its acquisition by Terra Firma in 2006.
Since joining Terra Firma in 2002 he has been involved
in a number of the group's other investments including
Phoenix Group, The Garden Centre Group, Tank & Rast
and RTR. Prior to joining the group his career ranged from
sales management and corporate development roles for
companies such as IBM and Nortel Networks to strategy
work for management consultants Bain & Co. Mr. Levi has a
BSc in Electrical Engineering and a BSc in Economics from
MIT as well as an MBA from Harvard.
Dr. Werner G. Seifert (Swiss)
Non-executive Chairman
Dr. Seifert joined AWAS in April 2008 as Chairman of the
AWAS Board of Directors. During the course of his extensive
career, Dr. Seifert held the position of Chief Executive of
Deutsche Börse AG for 12 years. Prior to this, Dr. Seifert was
General Manager and a member of the Senior Management
Board of Swiss Re and Chief Executive Officer of Swiss
Re Beteiligungen AG. Before that, he was a partner with
McKinsey & Company.
Mr. Raymond C. Sisson (US)
Appointed August 2010
Executive Director
Mr. Sisson is President and Chief Executive Officer of the
AWAS Group. Mr. Sisson has extensive experience in the
aviation industry across international sales, marketing,
operations, finance and legal disciplines. Mr. Sisson began
his aviation career in 1991 as a corporate lawyer specialising
in aircraft finance. He moved to GE Capital Aviation Services
in 1995, where he spent thirteen years in a variety of roles
including Vice President and Legal Counsel; Senior Vice
President, Sales & Marketing - Asia/Pacific; and Senior Vice
President & Region Manager - Middle East, Africa & Russia/
CIS. In October 2008, Mr. Sisson became President and CEO
of Titan Aviation Leasing Ltd. Prior to his appointment at
AWAS, he held the position of Chief Commercial Officer of
SR Technics in Zurich, Switzerland.
Mr. Steven Webber (British)
Appointed December 2011
Mr. Webber is a Managing Director with Terra Firma Capital
Partners having joined PFG, the forerunner to Terra Firma,
in 1996 following his graduation from the University of
Reading with a Master’s degree in International Securities,
Investment & Banking. Mr. Webber has worked on some
of the firm's most successful investments including
transactions as diverse as Annington Homes, Tank & Rast,
and the group’s pub businesses. More recently, Mr. Webber
worked on the AWAS deal and the acquisition of Pegasus
by AWAS, and has focused on the leisure, leasing and
transportation sectors.
Mr. Angus Williamson (Australian)
Appointed November 2008
Executive Director
Mr. Williamson is Head of Risk Management of the AWAS
Group having joined the company in April 2007. He has over
25 years' experience in the commercial aviation industry,
having worked in the air transport consulting environment,
and was previously with aircraft leasing company, AerCap,
where he held the positions of Head of Global Risk and
Head of Asset Investment.
31
Committees of AWAS Aviation Capital Limited
The Board has established an Audit Committee, a Finance Committee and a Nomination and Remuneration Committee.
Current Members
Werner Seifert
Robin Boehringer*
Daniel Bunyan
Marlin Dailey
Simon Glass
Hafiz Lalani**
Lorenzo Levi*
Raymond C. Sisson
Steven Webber *
Angus Williamson
David Chambers**
Nomination &
Remuneration
P
Board
Audit
Finance
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
Alternate Director to Mr. Lalani
P
P
P
P
*Employed by Terra Firma Capital Partners Limited ** Employed by CPPIB.
On 22 May, 2014 Hafiz Lalani was appointed to the Audit Committee, Finance Committee and Nomination and
Remuneration Committee.
On 22 May, 2014 Ryan Selwood resigned as a Director of the Company.
Attendance at the Board meetings of AWAS is shown below:
Director attendance at meetings:
Maximum number of meetings
Werner Seifert
Robin Boehringer
Daniel Bunyan
Marlin Dailey
Simon Glass
Hafiz Lalani
Lorenzo Levi
Ryan Selwood* (resigned on 22 May, 2014)
Raymond C. Sisson
Steven Webber
Angus Williamson
Board
6
6
6
6
6
6
3
6
6
5
6
Audit
6
6
3
6
5
-
Finance
6
6
3
6
6
5
-
Nomination &
Remuneration
3
3
2
3
1
3
2
-
*Denotes that the Director was either appointed or resigned during the year and was not eligible to attend all meetings
32
33
• to discuss with the Company’s and the Group’s external
Audit Committee
The Audit Committee may have up to four members. The
Audit Committee is elected by the Board. It is currently
chaired by Mr. Webber and the other members are Mr. Levi,
Dr. Seifert, and Mr. Lalani. The Audit Committee meets as
often as its members deem necessary, but in any event
no less than twice a year, and a quorum is two members.
It is responsible for ensuring that the internal and external
audit processes are carried out in the best interests of the
Company’s shareholders, creditors, employees and customers.
The Audit Committee has the unrestricted right to
obtain information for this purpose from any source
within the Group. It reports to the Board, which retains
full responsibility for the oversight of the Company’s
(unconsolidated and consolidated) financial statements
and of the Group’s financial reporting requirements and
obligations. The specific duties and responsibilities of the
Audit Committee include:
• to make decisions on behalf of the Board regarding the
appointment of the external auditor of the Company and
any questions of its resignation or dismissal and to make
decisions on behalf of the Board regarding the amount of
fees paid to the Company’s auditor;
• to discuss with the Company’s and the Group’s external
auditors before the audit commences, the nature and
scope of the audit, to review the audit plan and to
ensure co-ordination where more than one audit firm is
involved;
• to review with the Company’s and the Group’s external
auditors, the interim (if any) and annual financial
statements of the Company and the Group before
submission to the Board, focusing particularly on
»» any changes in accounting policies and practices or
major judgement areas;
»» significant adjustments resulting from the audit (at
year-end only);
»» the going concern assumption;
»» compliance with accounting standards; and
auditors any problems or reservations arising from the
interim review and final audit and any other matters the
external auditors may wish to discuss;
• to review the Company’s and the Group’s external
auditors’ management letters, if any, and the
Management’s response;
• to recommend to the Board appropriate policies of
internal control;
• to advise the Board on the implementation of policies on
risk and control and to ensure that a suitable system of
internal control for the implementation of such policies is
formulated, operated and monitored;
• to review the effectiveness of internal control policies
and to seek regular assurance from management that
will enable the Audit Committee to satisfy itself that the
system is functioning effectively in managing risks in the
manner which it has approved and to report its findings
to the Board;
• to decide on the implementation of the Group’s internal
audit programme and, in such case, to ensure coordination between the internal and external auditors
and ensure that the internal audit function is adequately
resourced and has appropriate authority and standing
within the Company and the Group;
• to consider the major findings of the internal and
external audit and the Management’s response and to
take all necessary steps to clarify all matters it deems
appropriate to submit to the Board;
• to submit to the Board any recommendations
with respect to internal controls and to make
recommendations with respect to the Company’s
financial statements (audited and unaudited) if
necessary;
• to submit to the Finance Committee its
recommendations on the management of foreign
exchange, interest rate, credit and other financial risks
if deemed necessary;
Lorenzo Levi, Hafiz Lalani, Steve Webber, Robin Boehringer
• to review compliance with tax legislation and to consider
actual or potential tax liabilities of the Group and to
review tax planning for the Group; and
• to appoint outside advisers as it deems necessary.
Nomination and Remuneration
Committee
The Nomination and Remuneration Committee may
comprise up to six members, and a quorum is two
members. The Chairman of the Nomination and
Remuneration Committee is Dr. Seifert and the other
members are Messrs. Lalani, Levi, Sisson, and Webber. The
Nomination and Remuneration Committee may meet as
often as its members deem necessary but in any event,
at least once a year. The Nomination and Remuneration
Committee is responsible for recommending to the
Board the appointment of Committee members, and for
administering any incentive plans within the AWAS group of
companies. It is also responsible for ensuring that Directors
and Management are fairly rewarded for their contributions
to the Group’s performance, and that individuals are not
directly involved either in fixing or approving their own
remuneration, thereby ensuring that due regard is given
to the ultimate interests of the shareholders and the
financial interests of the Company. The specific duties
and responsibilities of the Nomination and Remuneration
Committee include:
»» compliance with legal requirements
34
• to establish criteria to be used in selecting Directors.
Such criteria may be established in consultation with
the entire Board, with the CEO or other members of
Management;
• to authorise, as and when requested to do so by the
Board, searches for the selection of Management and
Directors and to engage the services of executive search
firms or consultants to assist in this process;
• to approve the remuneration of the executive Directors and
of Management and any adjustments to such remuneration.
The remuneration packages are to commence with a base
salary and may also, at the discretion of the Board, include a
performance-related element;
• to elaborate incentive and remuneration plans to be
applied within the Group;
• to advise the Board on and monitor a suitable
performance-related formula for the Group overall. The
goal of such a formula should be to create rewards that
are justifiable in terms of the Group’s own performance
and the corresponding returns on the shareholders’
investment over the same period;
• to provide an objective and independent assessment of
any benefits granted to Directors; and
• to ensure that the pension arrangements throughout the
Group are appropriate, well supervised and conform to
applicable law.
35
AWAS Compliance Programme
Finance Committee
The Finance Committee may comprise up to six directors,
and a quorum is two members. Dr. Seifert chairs the Finance
Committee and the other members are Messrs. Lalani, Levi,
Sisson, and Webber. The Finance Committee may meet as
often as its members deem necessary. The powers of the
Finance Committee include the establishment of a Group
financial strategy and the general guidelines and policies for
implementing the strategy. This includes:
• financial and investment policy, including the capital
structure of Group companies and the payment of
dividends;
• the management of foreign exchange, interest rate,
liquidity and other financial risk;
• the management of credit risk and implementation of
credit policies (where appropriate);
proposals to the Finance Committee by the CEO and/or
the Management, as the case may be).
In addition, the Finance Committee is specifically charged
with deciding the following matters, based on proposals by
the CEO and/or Management:
• honest and ethical conduct, including the ethical
• raising of external financing by the Company and/ or
• fair and accurate reporting of financial information in
the issuance of guarantees by the Company in amounts
above the limits delegated to Management;
• approval of investments or divestments within the
Group, insofar as they reflect a capital commitment or
sales proceeds in excess of certain delegated amounts;
• granting of securities, guarantees and indemnities (or any
other form of contingent commitment) by the Company
on behalf of third parties outside the ordinary course of
business; and
• approval of certain investments or divestments within
• participation and acquisition/divestiture policy, including
the acquisition and sale of individual participations of
strategic importance;
• communication policy regarding the financial press, the
financial community and shareholders;
• acquisition and divestiture of material corporate
premises, whether of a purchase, lease, or other
contractual nature; and
• submitting recommendations on matters to be decided
AWAS maintains a robust compliance programme designed
to promote:
the Group.
The Finance Committee is also charged with reviewing, in
conjunction with the Audit Committee, tax planning for
the Group. Any matter decided by the Finance Committee
within the limits of authority delegated to it generally
does not require ratification by the full Board. However,
the Finance Committee may seek ratification from the full
Board of any decision taken by it, if the Finance Committee
determines that such ratification is desirable or appropriate
in the circumstances.
or approved by the Board (generally on the basis of
handling of actual or apparent conflicts of interest
between personal and professional relationships;
accordance with applicable requirements;
• compliance with applicable laws, rules and regulations
that affect AWAS as an aircraft owner, trader and lessor
and as a global employer;
• the safeguarding of corporate assets and the proper use
of proprietary and confidential information;
• the prompt internal reporting of violations of legal
or regulatory requirements or other AWAS policies
regarding ethical conduct; and
AWAS provides training to its employees in areas that
present particular risk to the Company, such as compliance
with the Irish Prevention of Corruption Acts (1889-2010), the
UK Bribery Act 2010, the OECD Convention on Combating
Bribery of Foreign Public Officials in International Business
Transactions, the United States Foreign Corrupt Practices Act
and various other applicable laws involving export controls
and boycotts.
The Code of Conduct requires employees to report to
their manager, a Human Resources representative or the
Associate General Counsel any conduct of which they
become aware that may violate the Code of Conduct
or applicable law, and employees are protected from
retaliation by AWAS resulting from good faith reporting of
these possible violations. AWAS also provides a channel of
anonymous reporting.
• accountability for adherence to these principles.
Shareholder oversight
It is AWAS’ policy to comply (and to require compliance
by its employees) with all applicable laws and regulations
(including applicable anti-bribery, antitrust and anti-money
laundering laws). As an employer, AWAS is also committed
to opposing and eliminating unlawful discrimination,
retaliation and victimisation in the workplace. Violation
of these policies can subject an employee to disciplinary
action, up to and including termination of employment.
AWAS is owned by Carmel Capital Sàrl, which is owned by
investment funds managed by Terra Firma Investments (GP)
2 Limited and Terra Firma Investments (GP) 3 Limited, and
by CPP Investments Board Private Holdings Inc (“CPPIB”).
AWAS considers Terra Firma Holdings Limited, a Guernsey
registered company, to be the ultimate parent company
and Mr Guy Hands to be the ultimate controlling party.
In furtherance of these principles, AWAS maintains a Code of
Conduct which is made available to all employees on AWAS’
intranet portal. In addition, each employee is provided with
a copy of the Code of Conduct at the commencement of
employment and is asked to certify familiarity with, and
agreement to, its terms as a condition of employment.
AWAS upholds individual human rights in all of our
operations and we expect the same from our business
partners. AWAS provides reasonable working hours and fair
wages for those who work on our behalf. AWAS also has a
zero-tolerance policy for the use of child or forced labour, or
human trafficking practices.
Terra Firma and CPPIB receive weekly reports that contain
current information typically provided to a shareholder and
have regular and substantial informal contact with AWAS
management. Neither Terra Firma nor CPPIB act as guarantor
with respect to any of the Company’s obligations and all
corporate decisions affecting the Group are made by the
Company and, where appropriate, the Board or governing
body of the relevant Group affiliate. AWAS adheres to the
Walker Guidelines for disclosure and transparency.
Since the acquisition of AWAS, our shareholders have
invested over $2.7 billion in AWAS. No cash interest or
dividend payments have been made by AWAS to our
shareholders since the date of such acquisition.
Ray Sisson, Steve Webber, Lorenzo Levi
36
37
AWAS Financial
Statements 2014
38
39
Contents
Directors and other information
Directors
Robin Boehringer – German citizen (UK resident)
Daniel Bunyan – Canadian citizen (Irish resident)
Marlin Dailey – US citizen (Irish resident)
45
Simon Glass – UK citizen (Irish resident)
Independent auditor’s report
46
Hafiz Lalani – Canadian citizen (UK resident)
Consolidated statement of profit or loss and other comprehensive income
48
Lorenzo Levi – Italian citizen (UK resident)
Werner Seifert – Swiss citizen (Irish resident)
Consolidated statement of financial position
49
Raymond C. Sisson – US citizen (Irish resident)
Company statement of financial position
50
Steven Webber – UK citizen (UK resident)
Consolidated statement of cash flows
51
Angus Williamson – Australian citizen (Irish resident)
Company statement of cash flows
52
Consolidated statement of changes in equity
53
Registered office
70 Sir John Rogerson’s Quay
Dublin 2, Ireland
Company statement of changes in equity
54
Notes to the consolidated financial statements
55
Secretary
Matsack Trust Limited
c/o Matheson
Dublin 2, Ireland
Directors and other information
41
Directors’ report
42
Statement of Directors’ responsibilities
Unaudited pro-forma condensed financial information
124
Independent auditorKPMG
Chartered Accountants
1 Harbourmaster Place
IFSC
Dublin 1
Ireland
Principal bankers
Citibank N.A. New York
21st Floor Zone 1
111 Wall Street
New York, NY 10043
United States of America
SolicitorsMatheson
Dublin 2, Ireland
40
41
Directors’ report
Directors' report (continued)
The Directors present their annual report together with the audited consolidated financial statements of AWAS Aviation Capital Limited
(the “Company”) and its subsidiaries (together and hereinafter “the Group”) for the year ended 30 November 2014.
Principal risks and uncertainties (continued)
Principal activities, business review and future developments
Exposure to the commercial airline industry
The Group’s primary business is the leasing of commercial aircraft.
Purchases – the Group purchased 61 aircraft during the year.
As a supplier to and partner of the airline industry, the Group is exposed to the financial condition of the airline industry as it leases all of
its aircraft to commercial airlines customers. The financial condition of the airline industry is affected by, among other things, geopolitical
events, outbreaks of communicable pandemic diseases and natural disasters, fuel costs and the demand for air travel. To the extent that
any of these factors adversely affect the airline industry they may result in (i) downward pressure on lease rates and aircraft values, (ii)
higher incidences of lessee defaults, restructuring, and repossessions and (iii) inability to lease aircraft on commercially acceptable terms.
Sales – the Group disposed of 12 aircraft during the year. There was a total loss of one aircraft.
Risks relating to the leasing of aircraft
During the year the Group maintained its position as a leader in the aircraft leasing industry. The operational highlights of the year are
summarised below:
Leasing – the Group completed 110 new leasing transactions during the year with 54 customers. The total number of aircraft at 30
November 2014 was 314 (2013: 266).
The Group closed USD 2,696.4 million worth of financings for aircraft and forward orders during the year.
The Group had 16 aircraft on forward order due to deliver from 1 December 2014 to 2018; of which 14 aircraft are due to deliver during
the year ended 30 November 2015. The Group also had commitments to purchase four aircraft from airlines, which are due to deliver
during the year ended 30 November 2015.
The Directors will continue to evaluate new opportunities during 2015.
In order to continue to generate profits and cash flows, the Group as an owner and lessor of aircraft must address risks associated with
(i) the releasing of aircraft subject to market and competitive conditions at lease end dates, (ii) the maintaining of aircraft and funding of
maintenance activities, (iii) government and environment regulations relating to aircraft and their operation, (iv) ongoing risks relating to
financing and ownership of aircraft. Improper management of any of these risks could adversely affect the financial performance, position
and growth potential of the Group.
The principal risks and uncertainties, to which the Group is exposed, including the associated hedging activities, are addressed in note 27
to these financial statements. These include:
•• Asset risk;
Subsidiaries
•• Foreign exchange risk;
Details of the activities carried out by subsidiary undertakings together with the information required by Section 158 of the Companies
Act 1963 are set out in note 25 to these financial statements.
•• Interest rate risk;
Principal risks and uncertainties
•• Liquidity risk.
Any of the following risks could adversely affect the financial performance, position and / or growth potential of the Group. The
Directors have overseen Management putting in place systems and controls designed to mitigate these risks to a level that is considered
appropriate for the Group.
Results and dividends
Geopolitical and economic risks
As a global business, the Group leases aircraft to customers in many jurisdictions – exposing it to many and varying economic, social,
legal and political risks. Exposure to multiple jurisdictions may adversely affect the Group’s future performance, position and growth
potential. The adequacy and timeliness of Management’s response to risks in these jurisdictions are of critical importance to the mitigation
of this risk.
•• Credit risk; and
The results for the year ended 30 November 2014 are set out in the consolidated statement of profit or loss and other comprehensive
income on page 48 and in the consolidated statement of changes in equity on page 53 and the Company statement of changes in equity
on page 54.
The Directors do not recommend the payment of a dividend (2013: USD Nil).
Results from operating activities, before impairment of USD 82.1 million (2013: USD 191.3 million), were USD 650.6 million for the year
ended 30 November 2014 (2013: USD 571.5 million). During the year ended 30 November 2014, there was strong revenue growth driven
by aircraft deliveries, gain on disposal of aircraft and offset by increased depreciation and amortisation.
Profit for the year increased to USD 186.7 million for the year ended 30 November 2014 (2013: USD 72.4 million).
Total cash and cash resources as at 30 November 2014 were USD 479.4 million (2013: USD 442.6 million).
Total assets as at 30 November 2014 were USD 11,720.4 million (2013: USD 10,253.3 million).
42
43
Statement of Directors’ responsibilities
Directors’ report (continued)
The Directors are responsible for preparing the Directors’ report and the financial statements of the Group and Company in accordance
with applicable law and regulations.
Directors, secretary and their interests
Company law requires the Directors to prepare financial statements of the Group and Company for each financial year. Under that law
the Directors have elected to prepare the Group and Company financial statements in accordance with International Financial Reporting
Standards (“IFRSs”) as adopted by the European Union (“EU”) and as applied in accordance with the Companies Act 1963 to 2013.
In accordance with the Articles of Association, the Directors are not required to retire by rotation.
On 22 May 2014 Ryan Selwood resigned as a Director of the Company.
The Directors and secretary who held office at 30 November 2014 had no interests in the share capital of the Company or any Group
company at any time during the year.
Political donations
The Group and Company financial statements are required by law and IFRSs as adopted by the EU to present fairly the financial position
and performance of the Group and Company. The Companies Acts 1963 to 2013 provide in relation to such financial statements that
references in the relevant parts of these Acts to Group and Company financial statements giving a true and fair view are references to their
achieving a fair presentation.
In preparing the Group and Company financial statements, the Directors are required to:
During the year ended 30 November 2014 the Group made no donations for political purposes (2013: USD nil).
•• select suitable accounting policies and then apply them consistently;
Subsequent events
•• make judgements and estimates that are reasonable and prudent;
Details of important events affecting the Group and Company which have taken place since the end of the reporting period are disclosed
in note 28 to the financial statements.
•• state that the financial statements comply with IFRSs as adopted by the EU and have been properly prepared in accordance with the
Companies Acts 1963 to 2013; and
•• prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Group or Company will
Accounting records
continue in business.
The Directors believe that they have complied with the requirements of Section 202 of the Companies Act, 1990 with regard to keeping
books of account by employing accounting personnel with appropriate expertise and by providing adequate resources to the financial
function. The books of account of the Company are maintained at 4th Floor Block B, Riverside IV, Sir John Rogerson’s Quay, Dublin 2, Ireland.
The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial
position of the Company, and enable them to ensure that the financial statements of the Group are prepared in accordance with IFRSs, as
adopted by the EU and comply with the provisions of the Companies Acts 1963 to 2013. They are responsible for taking such steps as are
reasonably open to them to safeguard the assets of the Group and Company and to prevent and detect fraud and other irregularities.
Auditors
KPMG, Chartered Accountants, will continue in office in accordance with Section 160(2) of the Companies Act, 1963.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s
website. Legislation in the Republic of Ireland governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
On behalf of the board
The Directors are also responsible for preparing a Directors’ report that complies with the requirements of the Companies Acts 1963
to 2013.
/s/ Raymond C. Sisson
/s/ Simon Glass
Raymond C. Sisson
Simon Glass
DirectorDirector
/s/ Simon Glass
Raymond C. Sisson
Simon Glass
DirectorDirector
Date 26 February 2015
44
45
KPMG
IFSC
Dublin 1
Ireland
KPMG
IFSC
Dublin 1
Ireland
Independent auditor’s report to the members of AWAS Aviation Capital Limited
We have audited the group and parent company financial statements (“the financial statements”) of AWAS Aviation Capital Limited
for the year ended 30 November 2014 which comprise the consolidated statement of profit or loss and other comprehensive income,
consolidated and parent company statements of financial position, consolidated and parent company statements of cash flows,
consolidated and parent company statements of changes in equity and the related notes. The financial reporting framework that has been
applied in their preparation is Irish law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as
regards the parent company financial statements, as applied in accordance with the provisions of the Companies Acts 1963 to 2013.
This report is made solely to the company’s members, as a body, in accordance with Section 193 of the Companies Act 1990. Our audit
work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an
auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Independent auditor’s report to the members of AWAS Aviation Capital Limited
(continued)
Opinion on financial statements
In our opinion:
•• the group financial statements give a true and fair view, in accordance with IFRSs as adopted and applied by the EU, of the state of the
group’s affairs as at 30 November 2014 and of the its profit for the year then ended; and
•• the parent company statement of financial position gives a true and fair view, in accordance with IFRSs as adopted by the EU as
applied in accordance with the provisions of the Companies Acts 1963 to 2013, of the state of the parent company’s affairs as at 30
November 2014; and
•• the financial statements have been properly prepared in accordance with the Companies Acts 1963 to 2013.
Respective responsibilities of Directors and auditor
As explained more fully in the Statement of Directors’ Responsibilities on page 45 the Directors are responsible for the preparation of
the financial statements giving a true and fair view. Our responsibility is to audit and express an opinion on the financial statements
in accordance with Irish law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the
Financial Reporting Council’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment
of: whether the accounting policies are appropriate to the Group circumstances and have been consistently applied and adequately
disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial
statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies
with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially
inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications for our report.
Matters on which we are required to report by the Companies Acts 1963 to 2013
We have obtained all the information and explanations which we consider necessary for the purposes of our audit.
The parent company statement of financial position is in agreement with the books of account and, in our opinion, proper books of
account have been kept by the company.
In our opinion the information given in the directors’ report is consistent with the financial statements.
The net assets of the company, as stated in the parent company statement of financial position are more than half of the amount of its
called-up share capital and, in our opinion, on that basis there did not exist at 30 November 2014 a financial situation which under Section
40(1) of the Companies (Amendment) Act, 1983 would require the convening of an extraordinary general meeting of the company.
Matters on which we are required to report by exception
We have nothing to report in respect of the provisions in the Companies Acts 1963 to 2013 which require us to report to you if, in our
opinion the disclosures of Directors’ remuneration and transactions specified by law are not made.
/s/ Killian Croke
Killian Croke
for and on behalf of
KPMG
Chartered Accountants, Statutory Audit Firm
26 February 2015
IFSC
Dublin 1
Ireland
46
47
Consolidated statement of profit or loss and other comprehensive income
For the year ended 30 November 2014
Consolidated statement of financial position
As at 30 November 2014
In thousands of US Dollars
Note 20142013
Revenues
Lease revenue
4
1,142,636
1,046,358
Other income
5
34,285
28,346
Expenses
7
(430,530)
(379,159)
Gain on disposal of aircraft
17,484
1,534
Loss on transfer to held-for-sale
-
(3,803)
Loss on transfer to finance lease receivable
(505)
(5,936)
Aircraft maintenance
(18,758)
(25,523)
Asset impairment
10
(82,069)
(191,315)
General and administrative expenses
6
(94,009)
(90,351)
568,534
380,151
1,146
1,096
Finance income
8
Finance expenses
8
(347,707)
(295,234)
Net finance costs
(346,561)
(294,138)
Profit before income tax
221,973
86,013
9
(35,305)
(13,634)
Profit for the year 186,668
72,379
Income tax expense
Other comprehensive income (items that are or may be reclassified to profit or loss)
Available-for-sale financial assets – net change in fair value
24
648
28,469
Available-for-sale financial assets – re-classified to profit or loss
24
(21,569)
(14,617)
Income tax relating to components of other comprehensive income
2,615
(1,731)
Total other comprehensive income
(18,306)
12,121
Total comprehensive income for the year
168,362
84,500
All activities derive from continuing operations. All profits and total comprehensive income for the year and the preceding financial year
are attributable to the owners of the Company.
The accompanying notes on pages 55 to 123 form an integral part of these consolidated financial statements.
/s/ Simon Glass
Raymond C. Sisson
Simon Glass
DirectorDirector
Note
2014
2013
Assets
Property, plant and equipment
10
10,674,440
8,628,431
Interest in aircraft
11
-
384,642
Deposits for aircraft purchases
12
252,674
635,114
Other non-current assets
13
44,362
39,453
Finance lease receivable
14
21,805
14,065
Intangible assets
19
128,345
Loans to shareholders
25 5,7395,283
Total non-current assets
11,127,365
9,706,988
Cash and cash equivalents
17
229,856
242,879
Restricted cash
17
249,586
199,712
Available-for-sale financial assets
24
-
20,921
Other current assets
13
43,886
35,241
Derivative financial assets
24
778
1,671
Trade and other receivables
15
27,399
29,644
Prepayments
1,482
1,909
14
15,393
3,510
Intangible assets
19
13,763
Assets held-for-sale
18 10,91910,872
Total current assets
593,062
546,359
Total assets
11,720,427
10,253,347
Equity
Share capital
20
1,723,152
1,723,152
Additional paid in capital
20
424,243
555,801
Capital contribution
20
591,726
587,660
Available-for-sale reserves
20
-
18,306
Reserves
20 391,71960,547
Total equity
3,130,840
2,945,466
Liabilities
Loans and borrowings
21
5,687,769
5,177,636
Borrowings from shareholders
25
60,404
50,725
Deferred tax liabilities
16
182,267
148,912
Maintenance advances and liabilities
22
689,137
575,772
Intangible liabilities
19
14,214
Non-current trade and other payables
23 207,031180,352
Total non-current liabilities
6,840,822
6,133,397
21
1,442,278
899,805
Trade and other payables
23
153,677
124,116
Derivative financial liabilities
24
9,651
6,534
22
129,227
132,525
Intangible liabilities
19
2,836
Liabilities held-for-sale
18
7,039
6,924
Current tax
4,0574,580
Total current liabilities
1,748,765
1,174,484
Total liabilities
8,589,587
7,307,881
Total equity and liabilities
11,720,427
10,253,347
/s/ Simon Glass
Raymond C. Sisson
Simon Glass
DirectorDirector
48
49
Company statement of financial position
As at 30 November 2014
Consolidated statement of cash flows
Note
2014
2013
Assets
Investments in subsidiary undertakings
25
2,387,287
2,019,709
Loans to related parties
25
1,332,501
1,069,182
Deferred tax assets
16
-
134,130
Loans to shareholders
25
5,739
5,283
Total non-current assets
3,725,527
3,228,304
210,786
223,559
39
23
Receivable from related parties
365,597
368,689
25
Total current assets
576,422
592,271
Total assets
4,301,949
3,820,575
Equity
Share capital
20
1,723,152
1,723,152
20
184,350
178,086
20
591,726
587,660
20
512,154
Reserves
Total equity
96,442
3,011,382
2,585,340
Liabilities
21
335,592
366,839
Deferred tax liability
16
13,777
-
Borrowings from shareholders
25
Total non-current liabilities
9,055
6,066
358,424
372,905
21
59,147
79,650
Payable to related parties
25
871,944
781,397
Current tax liability
1,052
1,283
Total current liabilities
932,143
862,330
Total liabilities
1,290,567
1,235,235
Total equity and liabilities
4,301,949
3,820,575
The accompanying notes on pages from 55 to 123 form an integral part of these consolidated financial statements.
/s/ Simon Glass
2014
2013
Cash flows from operating activities
Profit for the year
186,668
72,379
Adjustments for:
430,530
379,159
Asset impairment
82,069
191,315
Gain on disposal of fixed assets
(17,484)
(1,534)
Loss on assets classified as held-for-sale
-
3,803
Loss on transfer to finance lease receivable
505
5,936
Unrealised loss/(gain) in value of derivatives
4,010
(3,832)
Net finance costs
294,020
253,891
Amortisation of fair value discounts and financing fees
48,531
44,079
Income tax
35,305
13,634
Changes in operating assets and liabilities
D
2,245
(9,595)
ecrease / (increase) in trade and other receivables
(Increase) / decrease in other assets
(13,554)
5,584
Increase in trade and other payables
56,240
29,291
Increase in maintenance advances and liabilities
110,067
1,241
Increase / (decrease) in other liabilities
51,309(7)
1,270,461
985,344
Net cash from operating activities
Cash flows from investing activities
Movement in restricted cash
Acquisition of property, plant and equipment
Acquisition of interest in aircraft
Proceeds from sale of property, plant and equipment
Loan to shareholder
Interest received
Deposits paid for the purchase of aircraft
Net cash used in investing activities
(49,874)
(21,463)
(1,896,369)
(1,396,820)
-
(344,487)
101,226
226,283
(200)
619
1,038
(173,214)(311,103)
(2,017,812)
(1,846,552)
Cash flows from financing activities
Proceeds from shareholder financing
Repayment of shareholder financing
Proceeds from borrowings
Repayment of borrowings
Cash interest paid
Payment of transaction costs related to loans and borrowings
Net cash from financing activities
15,000
17,000
(15,000)
(17,000)
2,696,418
1,922,464
(1,645,265)
(1,007,034)
(265,542)
(230,324)
(51,283)(79,987)
734,328
605,119
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of the year
(13,023)
242,879
(256,089)
498,968
Cash and cash equivalents at 30 November
229,856
242,879
Supplemental disclosure:
Cash paid for interest
Cash paid for taxes
265,542
230,324
1,4661,422
Raymond C. Sisson
Simon Glass
DirectorDirector
/s/ Simon Glass
Raymond C. Sisson
Simon Glass
DirectorDirector
50
51
Company statement of cash flows
Consolidated statement of changes in equity
20142013
Share Additional
Capital Available Profit and
Capital
Paid In Contribution For Sale Loss Capital Reserves Reserves
Cash flows from operating activities
Profit for the year
Adjustments for:
Net finance costs
409,030
29,764
At 30 November 2012
(414,295)
(30,842)
Amortisation of financing fees
1,867
2,258
Income tax
3,388
981
Movement in related party balances
Movement in working capital
Net cash from / (used in) operating activities
93,639
(13,379)
(488)
1,955
93,141
(9,263)
Cash flows from investing activities
Loan to shareholder
Dividends received from a subsidiary
Investment in and long term loans to subsidiaries
Net cash from / (used in) investing activities
Profit for the year
-
-
-
-
72,379
72,379
-
-
-
12,121
-
12,121
-
14,689
-
-
-
14,689
-
-
4,066
-
-
4,066
1,723,152 555,801
587,660
18,306
Transactions with shareholders, recorded directly in equity
Other reserve
Share based payment reserve
-
Profit for the year
-
-
-
-
186,668
186,668
(126,500)
(291,000)
-
-
-
(18,306)
-
(18,306)
Other reserve
-
12,946
-
-
-
12,946
17,000
-
-
4,066
-
-
4,066
(324,624)
86,894
Reclassification of imputed interest
- (144,504)
-
-
144,504
-
(29,628)
(33,675)
1,723,152 424,243
591,726
-
(464)
(77)
(291,000)
Movement in related party loans
Cash interest paid
Payment of transaction costs related to loans and borrowings
Interest received
27,784
36,878
Proceeds from borrowings
25,000
-
Repayment of borrowings
(77,600)
(57,600)
(364,532)
49,420
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of the year
(12,773)
223,559
(250,843)
474,402
Cash and cash equivalents at 30 November
210,786
223,559
29,628
33,675
-
-
Supplemental disclosure:
Cash paid for taxes
60,547 2,945,466
385,318
Cash paid for interest
(11,832) 2,842,211
15,000
Net cash (used in ) / from financing activities
6,185
-
258,618
Proceeds from shareholder financing
583,594
(200)
Cash flows from financing activities
1,723,152 541,112
At 30 November 2013
Total
Equity
At 30 November 2014
391,719 3,130,840
All equity is attributable to the holders of the ordinary shares in the Company.
/s/ Simon Glass
Raymond C. Sisson
Simon Glass
DirectorDirector
/s/ Simon Glass
Raymond C. Sisson
Simon Glass
DirectorDirector
52
53
Company statement of changes in equity
1. Reporting entity
Share Additional
Capital Profit and
Total
Capital
Paid InContribution Loss Equity
Capital Reserves Reserves
At 30 November 2012
1,723,152
163,398
583,594
66,678 2,536,822
Profit for the year
-
-
-
29,764
29,764
Other reserves
-
At 30 November 2013
14,688
-
-
-
4,066
1,723,152
178,086
587,660
-
14,688
-
4,066
96,442 2,585,340
Profit for the year
-
-
-
409,030
409,030
Other reserve
-
12,946
-
At 30 November 2014
-
12,946
4,066
4,066
-
(6,682)
-
1,723,152
184,350
591,726
6,682
-
512,154 3,011,382
AWAS Aviation Capital Limited (“AACL”) is a company incorporated and domiciled in the Republic of Ireland. The address of the
Company’s registered office is 70 Sir John Rogerson’s Quay, Dublin 2, Ireland. The consolidated financial statements of the Company as
at 30 November 2014 and for the year ended 30 November 2014 comprise the Company and its subsidiaries.
AACL’s sole shareholder is Carmel Capital Sàrl (“Carmel Capital”), a Luxembourg Société à Responsabilité Limitée, which is owned
by investment funds managed by Terra Firma Investments (GP) 2 Limited and, Terra Firma Investments (GP) 3 Limited, and by CPP
Investment Board Private Holdings Inc (“CPPIB”).
AACL is the parent undertaking of the Group for which consolidated financial statements including the Company are prepared. The
financial statements of the Company are filed with the Registrar of Companies, Companies Office, Parnell Square Dublin 1 and may be
obtained by writing to the Secretary, AWAS Aviation Capital Limited, 70 Sir John Rogerson’s Quay, Dublin 2, Ireland.
AACL is a holding company for AWAS Acquisitions LLC (“AAI”) and AWAS Consolidated Holdings Limited (“ACHL”), which in turn is the
holding company for AWAS Aviation Investments Limited (“AAIL”), AWAS Aviation Trading Limited (“AATL”) and AWAS Aviation Holdings
Limited (“AAHL”).
2. Significant accounting policies
(a) Statement of compliance
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as
adopted by the EU and the Companies Acts 1963 to 2013.
IFRSs applied by the Group in the preparation of these consolidated financial statements are those that were effective and applicable
at 30 November 2014.
New standards and interpretations adopted during the year
All equity is attributable to the holders of the ordinary shares in the Company.
The following new standards became effective in 2014:
•• IFRS 13 Fair Value Measurement – defines fair value, sets out a single framework for measuring fair value and requires disclosures
about fair value measurements. It applies when other IFRSs require or permit fair value measurements. It does not introduce new
requirements to measure an asset or liability at fair value; change what is measured at fair value in IFRS, or; address how to present
changes in fair value. IFRS 13 is effective for the Group or Company for the 2014 financial year. The disclosure requirements have
been adopted in the Consolidated Financial Statements.
/s/ Simon Glass
•• IAS 19 Defined Benefit Plans: Employee Contributions – Amendment clarifies the requirements that relate to how contributions
from employees or third parties that are linked to service should be attributed to periods of service. The change did not have an
impact on Group or Company financial statements.
Raymond C. Sisson
Simon Glass
DirectorDirector
54
55
2. Significant accounting policies (continued)
(c) Estimates and judgements
(a) Statement of compliance (continued)
The preparation of the consolidated financial statements in conformity with IFRSs requires management to make judgements,
estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and
expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed
to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of
assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
New standards and interpretations adopted during the year (continued)
•• IFRS 7 Offsetting financial assets and financial liabilities – The Group has adopted the amendments to IFRS 7, related to required
disclosures about offsetting financial assets and financial liabilities. The change did not have a material impact on Group or
Company financial statements.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the
year in which the estimate is revised if the revision affects only that year, or in the year of the revision and future years if the revision
affects both current and future years.
•• IAS 36 Amendments: Impairment of Assets – Recoverable Amount Disclosures for Non-Financial Assets – The Group has adopted
the amendments to IAS 36, related to disclosure of recoverable amount. The change did not have a material impact on Group or
Company financial statements.
New standards and interpretations not adopted
Lease revenue
The Group leases flight equipment principally under operating leases, and reports rental income on a straight-line basis over the life
of the lease as it is earned. In certain cases, leases provide for additional rentals based on usage, which is recorded as revenue as it
is earned under the terms of the lease. The usage is calculated based on hourly usage or cycles operated, depending on the lease
agreement. Other leases provide for a lease-end adjustment payment by us, or the lessee, at the end of the lease based on usage of
the aircraft and its condition upon return.
A number of new standards, amendments to standards and interpretations that have been EU endorsed are effective for future
reporting periods, and have not been applied in preparing these financial statements:
•• IFRS 10 Consolidated Financial Statements
•• IFRS 11 Joint Arrangements
•• IFRS 12 Disclosures of Interests in Other Entities
The Group also includes supplemental amounts recorded as maintenance advances that are not expected to be reimbursed to lessees
as lease revenue. Amounts not expected to be refunded during the lease are recorded as lease revenue when the Group has reliable
information that the lessee will not require reimbursement of maintenance advances based on the maintenance forecasting model,
which estimates the maintenance inflows and outflows to lease termination date for each aircraft.
•• IAS 27 Separate Financial Statements
•• IAS 28 Investments in Associates and Joint Ventures
•• Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)
•• IFRIC 21 Levies
•• IAS 39 Amendments: Novation of Derivatives
These are all effective for annual periods beginning on or after 1 January 2014. The Group has taken the decision not to adopt these
standards early. The extent of the impact for future accounting periods is still under review by the Group.
(b) Basis of preparation
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as
adopted by the EU. They have been prepared under the historical cost convention as modified by the valuation of certain financial
assets and liabilities at fair value through the consolidated statement of comprehensive income and the valuation of equity settled
share based payments.
In accounting for property, plant and equipment, the Group make estimates about the expected useful lives, the fair value of attached
leases and the estimated residual value of aircraft. In estimating useful lives, fair value of leases and residual value of aircraft, the Group
relies upon actual industry experience, supported by estimates received from an independent appraiser, with the same or similar
aircraft types and considering our anticipated utilisation of the aircraft.
In accordance with IAS 16 – Property, Plant and Equipment, the Group’s aircraft that are to be held and used, are reviewed for
impairment whenever events or changes in circumstances indicate that the carrying value of the aircraft may not be recoverable. An
impairment review involves consideration as to whether the carrying value of an aircraft is not recoverable and is in excess of its fair
value. In such circumstances a loss is recognised as a write down of the carrying value of the aircraft to the higher of value in use and
fair value less cost to sell.
The individual financial statements of the Company have been prepared in accordance with IFRSs as adopted by the EU as applied
in accordance with the Companies Acts 1963 to 2013 which permits a company that publishes its Company and Group financial
statements together to take advantage of the exemption in Section 148(8) of the Companies Act 1963, from presenting to its
members its Company income statement and related notes that form part of the approved Company financial statements.
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57
(c) Estimates and judgements (continued)
(c) Estimates and judgements (continued)
Property, plant and equipment (continued)
The review for recoverability has a level of subjectivity and requires the use of judgement in the assessment of estimated future cash
flows associated with the use of an item of property, plant and equipment and its eventual disposition. Future cash flows are assumed
to occur under the current market conditions and assume adequate time for a sale between a willing buyer and a willing seller.
Expected future lease rates are based upon all relevant information available, including the existing lease, current contracted rates for
similar aircraft, appraisal data and industry trends, and assumptions about downtime between re-leasing events and the amount of
re-leasing costs.
The factors considered in estimating the future cash flows are impacted by changes in contracted lease rates, future projected lease
rates, transition costs, estimated downtime, estimated residual values, economic conditions, technology and airline demand for
particular aircraft types. These estimated cash flows are discounted at 5.3% per annum, which management believe is appropriate for
individual asset classes assessed. (2013: 5.3%).
The Group records supplemental amounts as maintenance advances. Amounts not expected to be refunded during the lease are
recorded as lease revenue when the Group has reliable information that the lessee will not require reimbursement of maintenance
advances based on the maintenance forecasting model.
When aircraft are sold the portion of the accrued liability not specifically assigned to the buyer is derecognised from the statement of
financial position as part of the gain or loss on disposal of the aircraft.
These consolidated financial statements are presented in United States Dollars (“USD”), which is the functional currency of the
Company and all the companies in the Group. All financial information presented in USD has been rounded to the nearest thousand.
The Directors of the Company believe that USD most faithfully represents the economic effects of the underlying transactions, events
and conditions.
(e) Basis of consolidation
Deferred tax assets and liabilities
The Group uses the balance sheet method for accounting for deferred taxes. Under the balance sheet method, deferred taxes are
recognised for all temporary differences between the carrying amounts of assets and liabilities in the financial statements and their
corresponding tax bases. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when
the asset is realised or the liability settled. The effect on deferred taxes of changes in the tax rate is recognised in income or expense in
the period that includes the enactment date.
The Group records a valuation allowance for deferred tax assets when the probability of realisation of the asset is less than more likely
than not. Changes in recognition or measurement are reflected in the period in which the change in judgement occurs. In assessing
the reliability of deferred tax assets, the Group considers whether it is probable that some or all of the deferred tax assets will not
be realised. All available evidence is considered and weighed to determine whether a valuation allowance is needed or should be
removed. The ultimate realisation of deferred tax assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. This could be significantly reduced in the near term if estimates of
future taxable income are reduced due to prolonged dislocation in the capital markets, or there are negative changes in economic
conditions and their consequences for air travel generally and demand for aircraft specifically. The key judgements associated with the
accounting for deferred taxes relate primarily to the estimation or forecasting of future profits.
58
In many aircraft operating lease contracts, the lessee has the obligation to make periodic payments which are calculated with
reference to the utilisation of airframes, engines and other major life-limited components during the lease (supplemental amounts).
In such contracts, upon lessee presentation of invoices evidencing the completion of qualifying work on the aircraft, the Group
reimburses the lessee for the work, up to a maximum of the supplemental amounts received with respect to such work.
(d) Functional and presentation currency
Interest in aircraft
The Group recognises an interest in aircraft where a beneficial interest in an aircraft is obtained prior to transfer of ownership. Once
the Group obtains full ownership of these aircraft (i.e. on novation) the Interest in Aircraft will be transferred to property, plant and
equipment as part of the initial cost of each aircraft, the rental income will be recognised gross as part of lease revenue, and the
aircraft will be depreciated in accordance with the Group’s existing policies in this regard.
Subsidiaries
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating
policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are
exercisable are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from
the date that control commences until the date that control ceases.
In publishing the parent Company financial statements together with the Group financial statements, AWAS Aviation Capital Limited
has taken advantage of the exemption in the Companies Act 1963, Section 148(8) not to present its parent Company statement of
comprehensive income and related notes that form part of the AWAS Aviation Capital Limited consolidated financial statements. The
Company’s profit after tax for year ended 30 November 2014 was USD 409.0 million (2013: USD 29.8 million).
Transactions eliminated on consolidation
Intra-group balances, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the
consolidated financial statements. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that
there is no evidence of impairment.
59
(f ) Foreign currency transactions
(g) Financial instruments (continued)
Transactions in foreign currencies are translated to USD at exchange rates at the dates of the transactions. Assets and liabilities
denominated in foreign currencies are translated into USD at the exchange rate ruling at the reporting date, with differences arising
recognised as profit or loss in the consolidated statement of comprehensive income.
(g) Financial instruments
A financial instrument is recognised when the Group becomes a party to the contractual provisions of the instrument. Financial assets
are derecognised if the Group’s contractual rights to the cash flows from the financial assets expire, are extinguished, or if the Group
transfers the financial assets to a third party and transfers all the risks and rewards of ownership of the asset, or if the Group does
not retain control of the asset and transfers substantially all the risk and rewards of ownership of the asset. Regular way purchases
and sales of financial assets are accounted for at trade date, i.e., the date that the Group commits itself to purchase or sell the asset.
Financial liabilities are derecognised if the Group’s obligations, specified in the contract, expire or are discharged or cancelled.
Non-derivative financial instruments
Non-derivative financial instruments comprise trade and other receivables, cash and cash resources, loans and borrowings, and trade
and other payables. Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value
through profit and loss, any directly attributable transaction costs, except as described below. Subsequent to initial recognition, nonderivative financial instruments are measured at amortised cost using the effective interest rate method, less any impairment losses in
the case of financial assets.
Fair values of non-derivative financial instruments, which are determined for disclosure purposes, are calculated based on the present
value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date.
Cash
Cash and cash equivalents comprise cash balances held for the purpose of meeting short term cash commitments and investments
which are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. Where
investments are categorised as cash equivalents, the related balance has a maturity of three months or less from the date of
acquisition. Cash is carried at amortised cost.
Restricted cash
Restricted cash comprises cash held by the Group but which is ring-fenced or used as security for specific financing arrangements,
and to which the Group does not have unfettered access. Restricted cash is measured at amortised cost.
Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale or are not classified as
any other category of financial assets. Available-for-sale financial assets comprise estimated values of approved claims arising from
lessee bankruptcies and restructurings. The fair value of available-for-sale financial assets is determined by reference to inputs that are
observable for the asset, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Fair value changes, other than impairment
losses, are recognised in Other Comprehensive Income and presented in Available-For-Sale Reserves within Equity. When the
available-for-sale financial asset is sold or retained, the gain or loss accumulated in equity is reclassified to profit or loss and reported
as part of other income.
Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised
cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised as profit or loss in the
consolidated statement of comprehensive income over the period of borrowings using the effective interest rate method. Borrowings
are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least one year
after the reporting date.
Trade and other receivables are recognised initially at fair value and are thereafter measured at amortised cost using the effective
interest rate less any provision for impairment. Trade and other receivables are discounted when the time value of money is
considered material. A provision for impairment of trade receivables is recognised when there is objective evidence the Group will
not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor,
probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered
indicators that the trade receivable is impaired.
Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest
method.
Derivative financial instruments
Derivatives not designated as hedges
The Group holds derivative financial instruments to economically hedge its interest rate risk exposures. Derivatives are recognised
initially at fair value; attributable transaction costs are recognised through profit or loss when incurred. Subsequent to initial
recognition, derivatives are measured at fair value through profit or loss.
Embedded derivatives
Certain derivatives embedded in other financial instruments, are treated as separate derivatives when their economic characteristics
and risks are not closely related to those of the host contract and the host contract is not carried at fair value through profit or loss.
These embedded derivatives are separately accounted for at fair value, with changes in fair value recognised in profit or loss.
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61
(h) Property, plant and equipment
(i) Interest in aircraft
Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses. Aircraft that
management intends to hold and lease are stated at cost less accumulated depreciation and impairment charges, if applicable.
Depreciation is calculated on a straight line basis to the aircrafts’ estimated residual value over the estimated useful economic life of
the aircraft asset, which is up to 35 years from the date of manufacture.
The Group recognises an Interest in Aircraft where a beneficial interest in an aircraft is obtained prior to transfer of ownership. On
transfer of ownership to the Group, Interest in Aircraft is reclassified as aircraft. Interest in Aircraft is recorded at cost less provision for
impairment where necessary.
Aircraft and engines are assessed for recoverability in accordance with IAS-36 – Impairment of Assets (“IAS-36”), whenever events or
changes in circumstances indicate that their carrying value may not be recoverable. Notwithstanding the results of this review, in
certain circumstances management also considers the carrying values of specified aircraft where indicators of a diminution in value
have been identified, based on aircraft specific sales and technical information.
For the purposes of measuring an impairment loss, each aircraft is tested individually by comparing its carrying amount to the higher
of value in use and fair value less cost to sell. Value in use is determined as the total cash flows expected to be generated by an aircraft,
discounted at a market rate. Fair value is determined from valuations based on maintenance adjusted current market values obtained
from an independent appraiser.
Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property,
plant and equipment.
35 years
– passenger aircraft and engines
25 years
– buyer furnished equipment
– computer equipment
Maintenance advances and liabilities comprise of maintenance advances, lessor contributions, repossession provisions and re-lease
provisions.
3 years
5-8 years
– other assets
5-8 years
Non-current assets (or disposal groups comprising assets and liabilities) which are expected to be recovered primarily through
sale rather than through continuing use are classified as held-for-sale. Immediately before classification as held-for-sale, the assets
(or components of a disposal group) are remeasured in accordance with the Group’s accounting policies. Thereafter the assets (or
disposal group) are measured at the lower of their carrying amount and fair value less cost to sell, except for certain items that
continue to be measured in accordance with usual accounting policies. These include financial assets, deferred tax assets and
employee benefit assets.
(k) Maintenance advances and liabilities
lease term
– fuxtures and fittings
(j) Non-current assets held-for-sale
Any impairment loss on a disposal group is first allocated to goodwill, and then to remaining assets and liabilities on pro-rata basis.
Impairment losses on initial classification as held-for-sale and subsequent gains or losses on re-measurement are recognised through
profit or loss. Gains are not recognised in excess of any cumulative impairment loss.
The estimated useful lives for the current and comparative periods are as follows:
– freighter aircraft
The net return on the Interest in Aircraft represents (i) the rental income due to the Group and (ii) an amortisation of the Interest in
Aircraft to reflect an allocation of the cost of that asset on a basis consistent with the depreciation profile for each of aircraft had they
been acquired on the respective dates.
Maintenance advances
In many aircraft operating lease contracts, the lessee has the obligation to make periodic payments which are calculated with
reference to the utilisation of airframes, engines and other major life-limited components during the lease (supplemental amounts).
In such contracts, upon lessee presentation of invoices evidencing the completion of qualifying work on the aircraft, the Group
reimburses the lessee for the work, up to a maximum of the supplemental amounts received with respect to such work.
Depreciation methods, useful lives and residual values are reassessed at each reporting date.
When aircraft are sold the portion of the accrued liability not specifically assigned to the buyer is derecognised from the statement of
financial position as part of the gain or loss on disposal of the aircraft.
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63
(k) Maintenance advances and liabilities (continued)
(l) Employee benefits (continued)
Lessor contributions
Short term benefits
At the beginning of each new lease subsequent to the first lease on a new aircraft, lessor contributions representing contractual
obligations on the part of the Group to contribute to the lessee’s cost of the next planned major maintenance event, expected
to occur during the lease, are established. The Group regularly reviews the level of lessor contributions to cover its contractual
obligations under current lease contracts and makes adjustments as necessary.
Short term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.
Lessor contributions represent a lease incentive and are recorded as a charge against lease rental income over the life of the
associated lease. When aircraft are sold the portion of the accrued liability not specifically assigned to the buyer is derecognised from
the statement of financial position as part of the gain or loss on disposal of the aircraft.
Repossession provision
The repossession provision represents the light maintenance costs associated with the repossession, preparation and transition of an
aircraft to a new lessee. Repossession provisions are recognised when the Group believes it is probable that the costs will be incurred
and the amount is reasonably estimable.
Heavy maintenance provision
The heavy maintenance provision represents the heavy maintenance costs associated with the repossession, preparation and
transition of an aircraft to a new lessee. This includes any costs related to heavy maintenance overhauls not covered by collected
maintenance advances. Heavy maintenance provisions are recognised when the Group believes it is probable that the costs will be
incurred and the amount is reasonably estimable.
A provision is recognised for the amount expected to be paid under short term cash bonus or profit sharing plans if the Group has a
present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation
can be estimated reliably.
Long term employee benefits
The Group’s net obligation in respect of long-term employee benefits other than pension plans is the amount of future benefit that
employees have earned in return for their service in the current and prior periods.
Share based payments transactions
The grant-date fair value of equity settled share based payment awards granted to employees is recognised as an employee
expense, with a corresponding increase in equity, over the period that the employee become unconditionally entitled to the awards.
The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market
performance conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number
of awards that meet the related service and non-market performance conditions at the vesting date. For share based payment awards
with non-vesting conditions, the grant-date fair value of the share based payment is measured to reflect such conditions and there is
no true-up for differences between expected and actual outcomes.
(m) Provisions
Re-lease provision
Re-lease provisions represent the Group’s best estimate of the costs associated with the preparing and transitioning of an aircraft from
one lessee to another.
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated
reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and
the risks specific to the liability.
(l) Employee benefits
Private pension plans
Obligations for contributions to defined contribution private pension plans are recognised as an expense through profit or loss when
they are due.
Termination benefits
Termination benefits are recognised as an expense when the Group is demonstrably committed, without realistic possibility of
withdrawal, to a formal detailed plan to terminate employment before the normal retirement date. Termination benefits for voluntary
redundancies are recognised if the Group has made an offer of voluntary redundancy, it is probable that the offer will be accepted,
and the number of acceptances can be estimated reliably.
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65
(n) Revenue
(p) Lease payments
The Group, as a lessor, leases aircraft principally under operating leases and records rental income on a straight line basis over the
life of the lease as it is earned. The Group accounts for lease rental income under lease agreements that include step-rent clauses
on a straight line basis over the lease term. In a few cases, lease agreements provide for rentals based on usage. The usage may be
calculated based on hourly usage or on the number of cycles operated, depending on the lease contract. The Group accounts for
lease rentals under such agreements on a basis that represents the time pattern in which the revenue is earned. For past-due rentals
on all leases, an impairment provision may be established on the basis of management’s assessment of collectability and to the extent
such past-due rentals exceed related security deposits held. Impairment charges are expensed through profit or loss and included in
lease revenue.
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases.
Upon entering into such a lease, payments made under operating leases are recognised as an expense through profit or loss on a
straight line basis over the term of the lease. Lease incentives are recognised as a reduction of the total lease expense, over the term of
the lease.
Most of the Group’s lease contracts require payment in advance. Rentals received, but unearned under these lease agreements, are
recorded as deferred revenue in trade and other payables.
In certain contracts, the lessee is required to re-deliver the aircraft in a similar maintenance condition (normal wear and tear
excepted) as when accepted under the lease, with reference to major life-limited components of the aircraft. To the extent that such
components are re-delivered in a different condition than at acceptance, there is normally an end-of-lease compensation adjustment
for the difference at re-delivery. Amounts received as part of these re-delivery adjustments are recorded as lease rental income at
lease termination.
The Group include amounts recorded as maintenance advances that are not expected to be reimbursed to lessees as lease revenue.
(o) Finance income and expenses
Finance income comprises interest income on funds invested, dividend income, changes in the fair value of financial assets at fair
value through profit or loss, foreign currency gains, and gains on derivatives instruments that are recognised in profit or loss. Interest
income is recognised as it accrues, using the effective interest method. Dividend income is recognised on the date that the Group’s
right to receive payment is established, which in the case of quoted securities is the ex-dividend date.
Finance expenses comprise interest expense on borrowings, unwinding of the discount on provisions, foreign currency losses,
changes in the fair value of financial assets at fair value through profit or loss, impairment losses recognised on financial assets and
losses on hedging instruments that are recognised in profit or loss. All borrowing costs are recognised in profit or loss using the
effective interest method.
When the Group leases an asset from an external party and has substantially all the risks and rewards of ownership, the lease is
classified as a finance lease. Minimum lease payments made under finance leases are apportioned between the finance expense
and reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a
constant periodic rate of interest on the remaining balance of the liability. Contingent lease payments are accounted for by revising
the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed.
(q) Income tax expense
Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss except to the extent that
it relates to items recognised in other comprehensive income or directly in equity, in which case the related tax is also recognised in
other comprehensive income or equity respectively.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the
reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised
for the following temporary differences: those arising on the initial recognition of goodwill, those arising on the initial recognition
of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and
differences relating to investments in subsidiaries to the extent that they probably will not reverse in the foreseeable future. Deferred
tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws
that have been enacted or substantively enacted by the reporting date.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary
difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer
probable that the related tax benefit will be realised.
Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related
dividend is recognised.
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(r) Investments
(v) Segmental reporting
Investments in subsidiaries are shown at cost less provisions for impairments in value. Income from investments in subsidiaries,
together with any related tax credit, is recognised in the statement of other comprehensive income in the period in which it is
receivable.
IFRS 8 ‘Operating Segments’ sets out the requirements for disclosure of financial and descriptive information about the Group’s
operating segments. As a consequence of the listing of the Group’s Senior Secured Notes due 2016 on the Global Exchange Market
of the Irish Stock Exchange, the Group applies IFRS 8 ‘Operating Segments’. For management and reporting purposes the Group’s
activities are organised in one reportable segment based on information provided internally to the Chief Operating Decision Maker
(the “CODM”). The CODM is considered to be the Company’s Board of Directors. The principal activities of the Group involve the
acquisition and leasing of commercial jet aircraft and associated aircraft disposals.
(s) Share Capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a
deduction from equity, net of any tax effects.
(t) Low interest and interest free loans
Low interest and interest free loans are measured on initial recognition at fair value. Fair value of below–market loans is the present
value of the expected future cash flows, discounted using a market related rate.
Any difference between the cost and the fair value of the instrument upon initial recognition is recognised as a gain or a loss in profit
or loss, unless the loan is from a shareholder or related party acting on behalf of the shareholder in its capacity as a shareholder. In
the latter case the resulting credit is reflected in equity, as the substance of the low interest and/or interest free terms represent a
contribution by the shareholder.
The difference between the amount initially recognised as a liability in respect of loan interest and/or interest free loans and the
amount ultimately repayable is recognised as a finance expense through profit or loss using the effective interest method.
(u) Intangible assets and liabilities
(w) Financial guarantees
Financial guarantees are initially recognised in the financial statements at fair value on the date that the guarantee is given.
Subsequent to initial recognition, the Group’s liabilities under such guarantees are measured at the higher of the initial measurement
and the best estimate of the expenditure required to settle any financial obligation arising as a result of the guarantees at the
reporting date. Any increase in the liability relating to guarantees is taken to the statement of comprehensive income.
3. Determination of fair values
A number of the Group’s accounting policies and disclosures require the determination of fair value, for financial and non-financial
assets and liabilities. Fair value is the amount at which an instrument could be exchanged in an arm’s length transaction between
informed and willing parties, other than as part of a forced liquidation sale. Fair values have been determined for measurement and
/ or disclosure purposes based on the following methods. Where applicable, further information about the assumptions made in
determining fair values is disclosed in the notes specific to that asset or liability.
When measuring fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair values are
categorised into different levels in fair value hierarchy based on the inputs used in the valuation techniques as follows.
Lease intangible assets
Lease intangible asset represents the value of an acquired lease where the contractual rent payments are above the market rate at
the date of acquisition. This asset is amortised over the remaining term of the related lease agreements and recorded as a non-cash
reduction in lease rental income.
•• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
•• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices).
•• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Lease intangible liabilities
Lease intangible liability represents the value of an acquired lease where the contractual rent payments are below the market rate at
the date of acquisition. This liability is amortised over the remaining term of the related lease agreements and recorded as a non-cash
increase in lease rental income.
Maintenance intangible assets
If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair value hierarchy,
then the fair value measurement is categorised in its entirety in the same levels of the fair value hierarchy as the lowest level input that
is significant to the entire measurement.
The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change
has occurred.
Maintenance intangible asset represents the value in the difference between the contractual right under the acquired leases to
receive the aircraft in a specified maintenance condition at the end of the lease and the actual physical condition of the aircraft at
the date of acquisition. The amortisation for maintenance intangible commences when the Group has reliable information about
maintenance advances received under the same lease that are not expected to be reimbursed to customers or at the end of the lease.
Maintenance asset amortisation is recorded as a component of depreciation and amortisation.
68
69
3. Determination of fair values (continued)
4. Lease revenue
The fair value of property, plant and equipment recognised as a result of a business combination is based on market values. The
market value of property, plant and equipment is the estimated amount for which a property could be exchanged on the date of
valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties
had each acted knowledgeably, prudently and without compulsion. The Group uses an independent, professional valuations as an
estimate of the fair value of aircraft.
In thousands of USD 20142013
Lease rental income
1,142,636
1,046,358
Total lease revenue 1,142,636
1,046,358
Lease rental income is derived mainly from leasing commercial jet aircraft to various operators around the world. The distribution of
lease rental income by operator’s geographic region is as follows:
The fair value of trade and other receivables is estimated as the present value of future cash flows and is discounted at the market rate
of interest when the impact is material.
Cash and cash resources
The carrying amount approximates to fair value due to the short term nature of these instruments. Cash and cash resources comprise
restricted, unrestricted cash and short term investments.
The fair value of finance lease receivable is estimated by reference to lease market rates provided by external parties. Available-for-sale financial assets
%
USD ’000
%
Europe
247,763
22240,034
23
Asia / Pacific
544,674
48
429,121
41
North America and Caribbean
190,649
17
181,687
17
52,958
4
67,224
7
106,592
9
128,292
12
1,142,636
100
1,046,358
100
Africa / Middle East
Latin America
2014201420132013
USD ’000
Total lease revenue
The fair value of available-for-sale financial assets is estimated by reference to their quoted bid price at the reporting date. The fair
value for unquoted available-for-sale financial assets is determined by using valuation techniques for the underlying security such as
discounted cash flows and similar unquoted equity valuation models.
Lease rental income from the top five customers represented 18% (2013: 21%) of total revenues for the year ended 30 November
2014. No customer accounted for more than 6% (2013: 6%) of revenues in the year to 30 November 2014. At 30 November 2014, there
were 31 aircraft subject to lease contracts with customers which are scheduled to expire during the year ending 30 November 2015
(2013: 28 scheduled to expire during year ended 30 November 2014).
At 30 November 2014, 24 lease contracts (2013: 26) had lessee early termination rights, 10 lease contracts (2013: 8) had purchase
option rights, and three lease contracts (2013: 4) had lessor early termination rights.
The fair value of loans and borrowings is estimated as the present value of future cash outflows discounted at market rates of similar
credit quality.
Derivatives – interest rate swaps and caps
Interest rate swaps and interest rate cap contracts held by the Group are designated as financial instruments through profit and
loss and measured at fair value. Fair value is based on broker quotes, which are tested for reasonableness by discounting estimated
future cash flows based on the terms and maturity of each contract and using market interest rates for a similar instrument at the
measurement date. Fair values include adjustments to take account of the credit risk of the Group entity and counterparty as required.
At 30 November 2014, the Group had contracted to receive the following minimum cash lease rentals under non-cancellable
operating leases:
In thousands of USD Derivatives – embedded derivatives
Embedded derivatives are fair valued using option pricing model and by reference to market rates provided by external parties.
70
During the year ended 30 November 2014 contingent rental income comprising the release of maintenance advances totalled USD
46.0 million (2013: USD 78.9 million). Lease revenue also includes a charge associated with the amortisation of lease incentive assets
of USD 21.5 million (2013: USD 8.9 million) for the year ended 30 November 2014. In addition, lease revenue includes a net charge
associated with the amortisation of intangibles of USD 7.5 million (2013: nil) for the year ended 30 November 2014. Further details
disclosed in note 19.
20142013
Not later than one year
1,182,598
960,268
Later than one year and not later than five years
3,534,480
2,705,650
Later than five years
1,572,868
1,027,030
Total
6,289,9464,692,948
71
5. Other income
6. General and administrative expenses (continued)
Other income
34,285
28,346
Total other income
34,285
28,346
Other income relates mainly to sale of third party claims, gains on spare part sales, release of security deposits, and settlements
received from counterparties.
In thousands of USD
At 30 November 2014, the Group had contracted to pay the following minimum lease rentals under non-cancellable operating leases
relating to office space:
In thousands of USD
20142013
Not later than one year
2,653
2,762
Later than one year and not later than five years
6. General and administrative expenses
9,031
10,187
19,105
23,771
Total
30,78936,720
20142013
Compensation and benefit expenses
56,034
53,914
Legal and professional fees
9,401
7,271
Office expenses
4,834
4,644
Travel expenses
4,627
5,522
Administrative expenses
19,113
19,000
Total general and administrative expenses
94,009
90,351
The Group incurred office lease rental expense for the year ended 30 November 2014 of USD 3.1 million (2013: USD 2.9 million).
7. Statutory information
In thousands of USD
20142013
The profit for the year has been arrived at after charging:
Directors’ remuneration:
In thousands of USD
20142013
Salaries and wages
-37
Fees
The compensation and benefit expenses breakdown is as follows:
Share based payments
3,766
3,766
Other emoluments
6,733
6,097
10,4999,900
Total
42,050
41,415
Long term employment benefits and share based payments
8,119
7,382
Contributions to defined contribution plans
2,492
2,400
Auditor’s remuneration:
Health and welfare
1,711
1,615
Audit of the Group financial statements
994
932
Other
1,6621,102
Other assurance services
795
850
2,261
516
-
311
Total
56,03453,914
Tax advisory services
Other non-audit services
4,0502,609
The Group had 130 persons (2013: 135) in employment as at 30 November 2014. The average number of employees during the year
was 133 (2013: 132).
Total
The employee breakdown by department is as follows:
Depreciation and amortisation of:
20142013
Property, plant and equipment depreciation
Maintenance intangible asset amortisation
Chief Executive Officer and Human Resources
11
Finance
3333
Impairment of property, plant and equipment
Commercial
2321
Total
Operations
4753
Investment and Strategy
16
Total
11
421,743
379,159
8,787
-
82,069
191,315
512,599570,474
17
130135
Costs of employer PRSI in respect of employees amounted to USD 3.0 million (2013: USD 2.9 million).
72
73
8. Finance income and expenses
9. Income tax expense included in the determination of profit or loss for the year
In thousands of USD
20142013
Interest income
893
Finance lease income
Finance income
1,071
253
25
1,146
1,096
In thousands of USD
20142013
Current tax expense
Current period
1,616
2,251
Adjustment for prior periods
(678)
(109)
938
2,142
33,093
12,313
1,274
(821)
Total current tax expense
Interest expense on financial liabilities
– External
– Internal interest on shareholder loans
Movement in fair value of derivatives
Net foreign exchange loss Deferred tax expense
(318,280) (272,144)
(24,474) (26,497)
(4,010) 3,832
Adjustment for prior periods
Total deferred tax expense
34,367
11,492
Total income tax expense
35,305
13,634
(943) (425)
Finance expense
(347,707)
(295,234)
Net finance income and expenses
(346,561)
(294,138)
Origination and reversal of temporary differences
Reconciliation of effective tax rate
Internal interest on shareholder loans during the year ended 30 November 2014, includes a charge of USD 14.7 million (2013: USD 16.7
million) relating to the acceleration of interest as a result of the repayment of shareholder loans of USD 15.0 million (2013: USD 17.0
million). This charge is partially compensated for, in equity, by an amount previously recognised as Additional Paid In Capital, net of
deferred tax, upon the receipt of a shareholder loan for a similar amount.
External interest during the year ended 30 November 2014, also includes a charge of USD 9.2 million relating to acceleration of
financing fees amortisation on the refinancing of certain facilities. External interest during the year ended 30 November 2013, also
included a charge of USD 11.1 million related to accelerated amortisation of deferred financing fees, and financing fees incurred, on
the re-pricing of the Term Loan 2010 and Term Loan 2012.
In thousands of USD
20142013
Profit for the year
Income tax expense
Profit excluding income tax
Income tax using the Company’s domestic tax rate (12.5%) US State taxes
35,305
13,634
221,973
86,013
27,746
10,751
2,463
1,615
559
388
Tax arising on permanent items
1,018
585
595
(782)
Impairment of deferred tax asset
3,639
2,100
Utilisation of losses not previously recognised
(715) (1,023)
35,305
13,634
Total income tax expense
72,379
Income taxable at different rate
Adjustment to prior period
74
186,668
75
10. Property, plant and equipment
10. Property, plant and equipment (continued)
In thousands of USD AircraftCapitalised
Other
Total
and engines
maintenance
assets
Cost
Balance at 30 November 2012
Capitalised maintenance
9,438,753
169,320
13,354
-2,242
9,621,427
-2,242
Transfer to assets held-for-sale
(28,530)
(3,155)
-
(31,685)
Transfer to finance lease receivable
(47,500)
-
-
(47,500)
Additions
1,882,702
-
1,2061,883,908
Disposals
(440,740) (30,396)
-(471,136)
Capitalised maintenance
10,804,685
138,011
14,560
-1,162
10,957,256
-1,162
Transfer from Interest in Aircraft
382,667
-
-
382,667
(29,859)
(5,593)
-
(35,452)
(65,098)
-
-
(65,098)
Additions
Reclassification of lease and maintenance
intangibles from prior year
Disposals
2,385,221
(49,897)
-
1,0042,386,225
-
-
(228,938) (12,719)
13,198,781
(49,897)
-(241,657)
120,861
15,564
13,335,206
Depreciation
Depreciation for the year
(1,907,013)
(64,143)
(8,593)
(1,979,749)
(365,944)
(11,851)
(1,364)
(379,159)
16,904
2,037
-
18,941
20,717
939
-
21,656
Impairment charge
Disposals
164,776 16,025
(9,957)
(2,328,825)
(411,743)
(8,572)
(1,428)
(421,743)
20,387
4,146
-
24,533
32,671
-
-
32,671
(75,043)
(7,026)
-
(82,069)
Disposals
The Group’s obligations under its secured bank loans and the Senior Secured Notes are secured by charges over, amongst other
things, some of the Group’s aircraft and related assets. The Directors develop the assumptions used in assessing the recoverability of aircraft and engines based on their knowledge of active
lease contracts, current and future expectations of the global demand for particular aircraft types and historical experience in the
aircraft leasing market and aviation industry, as well as information received from third party sources.
For the year ended 30 November 2014, the Group recorded a non-cash impairment charge of USD 82.1 million. The recoverable
amounts for these assets after impairment is USD 436.1 million. The recoverable amount has been determined on the basis of value
in use. The impairment charge was taken primarily on wide-body freighter aircraft, where expected increases in the future availability
of certain aircraft types and reduced lease rates due to the planned entry into service of more fuel efficient technologically advanced
aircraft, have had an impact on current values. These effects taken together indicate that at 30 November 2014 the carrying value of
certain aircraft may not be recoverable. The average age of the aircraft impaired during the year ended 30 November 2014 was
16 years.
For the year ended 30 November 2013, the Directors recognised a non-cash impairment charge of USD 191.3 million. The impairment
charge was taken on certain older classes of assets; primarily 737 Classics, 767’s and freighters, where expected increases in the future
availability of certain aircraft types and reduced lease rates due to the planned entry into service of more fuel efficient technologically
advanced aircraft, had a deleterious impact on values. This impact had been exacerbated by continuing high oil prices and slower
than anticipated rates of recovery in global macro-economic markets. These effects taken together indicated that at 30 November
2013 the carrying value of certain aircraft may not be recoverable. The average age of the aircraft impaired during the year ended 30
November 2013 was 17 years.
-180,801
(56,993)
Impairment charge
At 30 November 2014, the Group had agreements for the sale of three aircraft which met the criteria of IFRS 5 to be classified as heldfor-sale (2013: 2). See note 18 for details of assets held-for-sale.
(191,315)--
(191,315)
(2,261,875)
Depreciation for the year
As of 30 November 2014 the Group owned 314 aircraft (2013: 266 aircraft), within this the Group had 310 aircraft held for lease on
an operating basis (2013: 264 aircraft). During the year ended 30 November 2014, the Group sold 12 aircraft (2013: 20 aircraft) and
received insurance proceeds in relation to total loss damage to one aircraft. In addition the Group purchased 61 aircraft, including the
remaining interest in 10 aircraft acquired during the year 2013 (2013: 45 aircraft and an initial interest in 10 aircraft). In addition, four
aircraft are recognised as finance lease receivable (2013: 2 aircraft).
104,481 10,186
-114,667
(2,591,122)
(58,259)
(11,385)
(2,660,766)
At 30 November 2013
8,542,810
81,018
4,603
8,628,431
At 30 November 2014
10,607,659
62,602
4,179
10,674,440
Carrying amounts
During the year, the Group recognised maintenance and lease intangibles in relation to the acquisition of aircraft that were
purchased on lease. The Group reclassified lease and maintenance intangibles on aircraft acquired on lease in the prior year to
reflect this treatment. The value of these intangibles was previously recognised as a component of aircraft cost. Maintenance and
lease intangibles have been disclosed separately on the face of the statement of financial position as Intangible Assets or Intangible
Liabilities and accounted for in accordance with IAS 38. Further details disclosed in note 19.
76
77
10. Property, plant and equipment (continued)
12. Deposits for aircraft purchases
Geographic concentration:
In thousands of USD
The distribution of net book value of the aircraft by operator’s geographic region is as follows:
778,546
Increase in purchase deposits
345,842
Transferred to property plant and equipment as aircraft and engines
2014201420132013
USD ‘000
%
USD ‘000
%
635,114
Europe
2,455,91223
2,085,27624
Increase in purchase deposits
Asia / Pacific
5,166,710
49
3,758,550
44
Transferred to property plant and equipment as aircraft and engines
North America & Caribbean
1,552,428
15
1,554,730
18
497,503
5
489,017
6
Latin America
935,1068
655,2378
Total
10,607,659100
8,542,810100
11. Interest in aircraft
196,546
13. Other assets
20142013
Deferred lease incentive asset
-
Recognition of interest in aircraft
385,673
Amortisation of interest in aircraft
(1,031)
(578,986)
252,674
In thousands of USD In thousands of USD
(489,274)
18,454
22,154
Security deposits
5,174
3,640
Deferred charges
13,636
9,297
6,622150
Other
Total other current assets
43,886
35,241
Deferred lease incentive cost
42,807
35,767
384,642
Amortisation of interest in aircraft
(1,975)
Transferred to property, plant and equipment
(382,667)
-
During the year ended 30 November 2013 the Group entered into a Conditional Sale Agreement (the “CSA”) with another lessor (the
“Other Lessor”) to acquire 10 aircraft. Under the terms of the CSA, the Group was required to pay USD 385.7 million as consideration
for the aircraft and from the CSA date was entitled to a beneficial interest in the 10 aircraft (the “Aircraft”). The consideration was
payable up to 99% of the total due on the CSA date. The Other Lessor was obligated to novate the 10 aircraft to the Group on various
dates (the “Closing Date”) to be agreed from the CSA date onwards. The final payment was due in respect of each aircraft on its
Closing Date.
The Group obtained full ownership of 10 aircraft (i.e. on delivery), during the year ended 30 November 2014 and consequently USD
382.7 million was transferred from Interest in aircraft to Property, plant and equipment as part of the initial cost of each aircraft. The
rental income is now recognised gross as part of Lease revenue, and the aircraft will be depreciated in accordance with the Group’s
existing policies in this regard.
Deferred maintenance asset
Total other non-current assets
1,555
3,686
44,362
39,453
Deferred charges
Initial direct costs associated with negotiating and arranging a lease are capitalised as deferred charges. This asset is amortised over
the respective lease terms and recorded as part of general and administrative expense.
Deferred lease incentive asset
The deferred lease incentive asset represents lessor contributions to the cost of maintenance events during current leases. This asset is
amortised over the respective lease terms and recorded as a reduction of lease rental income.
Deferred maintenance asset
Deferred maintenance assets represent the amount recognised as part of historic business combinations representing lessees’
contracted obligations to perform expected aircraft maintenance activity under current leases.
During the year ended 30 November 2014, USD 1.0 million (2013: USD 5.5 million) was released to the statement of comprehensive
income account upon the termination of the leases without the maintenance activity having occurred, and USD 1.2 million (2013:
USD 2.2 million) was transferred to property plant and equipment as capitalised maintenance upon completion of the expected
maintenance activities.
78
79
14. Net investment in finance lease receivable
15. Trade and other receivables
The total net investment in finance leases included in the consolidated statement of financial position represents total lease payments
receivable in relation to four aircraft during the year ended 30 November 2014 (30 November 2013: 2 aircraft), net of finance charges
related to future accounting periods. Finance charges are allocated to accounting periods so as to give a constant rate of return on the
net cash investment in the lease. In addition, contingent rental received in relation to four aircraft during the year ended 30 November
2014 was USD 1.8 million (2013: USD 0.2 million).
Expected unguaranteed residual values of finance leases are based on the Group’s assessment of residual values and as at 30
November 2014 were nil (2013: nil). As at 30 November 2014, the Group has no allowance for uncollectable minimum lease payments
receivable (2013: nil).
Finance leases – gross receivables
Unearned finance income
Total non current receivables
Finance leases – gross receivables
Unearned finance income
Total current receivables
In thousands of USD 22,134
14,469
(329)
(404)
21,805
14,065
15,570
3,657
(177)
(147)
15,393
3,510
20142013
Trade receivables
28,709
Notes and other receivables
Allowance for impairment Net trade and other receivables
28,514
9,987
9,519
(11,297) (8,389)
27,399
29,644
Trade receivables represent rent, maintenance and other charges related to the lease of aircraft to lessees, owing by lessees.
The Group had the following activity in allowance for impairment of receivables:
In thousands of USD
5,055
Charge for the year
3,393
Amounts written off
(59)
8,389
Charge for the year
2,908
-
Amounts written off
11,297
Gross receivables from finance leases:
No later than one year
15,570
3,657
Later than one year and no later than five years
22,134
14,469
-
37,704
Unearned future finance income on finance leases
Net investment in finance lease
-
18,126
(506)
(551)
37,198
17,575
The net investment in finance leases is analysed as follows:
No later than one year
15,393
3,510
Later than one year and no later than five years
21,805
14,065
-
-
37,198
17,575
Net investment in finance lease
The table below presents credit and default risk relating to the Group’s trade and other receivables by gross carrying amount:
In thousands of USD Neither
Past due
Impaired
Total
past due
and not
nor impaired
impaired
2014201420142014
Measured at amortised cost:
Trade receivables
6,16411,24811,29728,709
Other receivables
9,987--
9,987
Total
16,15111,24811,29738,696
In thousands of USD Neither
Past due
Impaired
Total
past due
and not
nor impaired
impaired
2013201320132013
Measured at amortised cost:
Trade receivables
9,400
Other receivables
Total
10,725
8,389
28,514
9,519--
9,519
18,91910,725 8,38938,033
All trade receivables over 30 days are considered past due. As at 30 November 2014, of the past due and not impaired amount, USD
11.2 million is over 90 days.
80
81
15. Trade and other receivables (continued)
16. Deferred tax assets and liabilities (continued)
The Group’s most significant customer, an Asian airline, accounts for none of the receivables balances at 30 November 2014 and 30
November 2013. Another Asian airline accounted for 20% of the receivables balance at 30 November 2014 and 17% of the receivables
balance at 30 November 2013.
The Group’s trade receivables are secured by security deposits, letters of credits and maintenance reserves that the Group holds on
behalf of its customers.
Consolidated (continued)
Whilst the amount of the deferred tax asset that is recognised is considered realisable, it could be significantly reduced in the near
term if estimates of future taxable income during the carry-forward period are reduced due to the impact of a prolonged dislocation
in the capital markets and/or negative changes in economic conditions, and their consequences for air travel generally and specifically
demand for aircraft.
Company
16. Deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Consolidated
In thousands of USD Consolidated deferred tax assets and liabilities are attributable to the following:
Imputed interest on related party loan
-
(13,777)
(13,777)
Tax assets / (liabilities)
-
(13,777) (13,777)
In thousands of USD Property, plant and equipment
Employee entitlements
Interest
AssetsLiabilities
2014
2014
Net
2014
-
(458,382) (458,382)
2,111
-
2,111
-
(55,403)
(55,403)
Trade losses
329,407
-
329,407
Tax assets / (liabilities) 331,518
(513,785) (182,267)
(331,518) 331,518
-
-
(182,267) (182,267)
Set off
Net tax assets / (liabilities)
In thousands of USD Property, plant and equipment
Employee entitlements
Interest
Trade losses
Tax assets / (liabilities) Set off
Net tax assets / (liabilities)
AssetsLiabilities
2013
2013
-
(209,881) AssetsLiabilities
2014
2014
In thousands of USD AssetsLiabilities
2013
2013
Net
2014
Net
2013
Imputed interest on related party loan
134,130
-
134,130
Tax assets / (liabilities) 134,130
-
134,130
At 30 November 2014, the Company had no unrecognised deferred tax asset in respect of tax losses (2013: USD nil).
Net
2013
(209,881)
902
-
902
-
(144,671)
(144,671)
204,738
-
204,738
205,640
(354,552)
(148,912)
(205,640) 205,640
-
-
(148,912)
(148,912)
At 30 November 2014, the Group had an unrecognised deferred tax asset of USD 31.3 million in respect of tax losses (2013: USD 59.0
million).
In assessing the ability to realise the deferred tax assets, Directors consider whether it is probable that some portion or all of the
deferred tax assets will not be realised. All available evidence is considered and weighed to determine whether derecognition of a
deferred tax asset is needed or should be removed. The ultimate realisation of deferred tax assets is dependent upon the generation
of future taxable income during the periods in which those temporary differences become deductible.
82
83
17. Cash and cash resources
19. Intangible assets and liabilities
Unrestricted bank balances
229,856
232,879
Current intangible assets
13,763
-
-
10,000*
Non-current intangible assets
128,345
-
229,856
242,879
Total intangible assets
142,108
-
Bank balances subject to withdrawal restrictions
144,919
138,436
Current intangible liabilities
2,836
-
Short term investment – restricted
104,667
61,276*
Non-current intangible liabilities
14,214
-
Restricted cash
249,586
199,712
Total intangible liabilities
17,050
-
125,058
-
Short term investment – unrestricted
Total intangible assets and liabilities
Total cash and cash resources comprise cash and cash equivalent and restricted cash.
The average effective interest rate on deposits was 0.12% (2013: 0.16%).
Cash and cash resources subject to withdrawal restrictions represent cash securing the Group’s obligations under third party credit
facilities. Amounts received from lessees in respect of aircraft subject to certain funding arrangements may be required to be held in
segregated accounts to support, amongst other things, certain maintenance related payments including major airframe overhauls,
engine overhauls, engine life limited parts replacements, auxiliary power unit overhauls and landing gear overhauls, as well as interest
and principal payments on the related debt facility.
During the year ended 30 November 2014, the Group recognised maintenance and lease intangibles in relation to the acquisition of
aircraft that were purchased on lease. These intangibles are accounted for in accordance with IAS 38 Intangible Assets (“IAS 38”).
Short term investments are treasury bills and as at 30 November 2014 USD 104.7 million is subject to withdrawal restrictions (30
November 2013: USD 61.3 million).
Maintenance intangibles represent the value of the return condition of the aircraft on lease when compared to the current market
value of that aircraft, adjusted for current maintenance condition. Maintenance intangibles will be amortised to the earlier of the
release to the statement of profit or loss and other comprehensive income of related maintenance advances or the end of the lease.
Lease intangibles represent the value of an acquired lease rentals above or below the market rate for leases of a similar type of aircraft,
which is adjusted by the relevant credit risk associated with that lessee. Lease intangibles are amortised over the remaining life of
the lease.
As at 30 November 2014, USD 10.1 million, out of restricted cash, is pledged as collateral to lenders under certain credit facilities (30
November 2013: USD 11.9 million).
*During the year ended 30 November 2014, the Group modified the classification of short term investment to reflect more
appropriately the way in which cash and cash resources are presented. Comparative amounts as at 30 November 2013 were restated
for consistency. As a result, USD 61.3 million was reclassified from ‘Cash and cash equivalents’ to ‘Restricted cash’.
In thousands of USD
Current
18.Held-for-sale
At 30 November 2014 the Group had agreements for the sale of three aircraft which met the requirement to be classified as held-forsale (30 November 2013: 2 aircraft).
Assets classified as held-for-sale
Property, plant and equipment 10,919
10,872
Total assets held-for-sale
10,919
10,872
LeaseMaintenance
intangible assets
intangible assets
2014
2014
8,389
Net
2014
5,37413,763
Non-current
42,200
86,145128,345
Total
50,589
91,519142,108
In thousands of USD
L ease intangible liability
2014
Current2,836
Non-current14,214
Total17,050
Liabilities classified as held-for-sale
7,039
6,924
Total liabilities held-for-sale
7,039
6,924
84
85
19. Intangible assets and liabilities (continued)
20. Capital and reserves (continued)
Movements
In thousands of USD Lease intangible asset
Maintenance
Lease
intangible assets intangible liability
Total
-
Additions
----
-
-
-
-
24,753
38,511
(13,367)
49,897
(11,121)
(8,787)
3,586
(16,322)
Additions during 2014
36,957
61,795
(7,269)
91,483
50,589
91,519
(17,050)
125,058
Reclassification of amounts in respect
of additions in prior years
Amortisation during 2014
-
-
-
The authorised share capital of the Company at 30 November 2014 and 30 November 2013 comprised 1,300,000,000 ordinary shares
of USD 1.00 par value each and 45,888,262,735 ordinary shares of USD 0.01 par value.
The issued share capital of the Company at 30 November 2014 and 30 November 2013 comprised 1,264,269,739 ordinary shares of
USD 1.00 each issued and fully paid, and 45,888,262,735 ordinary shares of USD 0.01 each issued and fully paid.
The holders of ordinary shares are entitled to receive dividends as declared from time to time.
The sole shareholder has all powers and full voting rights as permitted under the applicable company laws.
The movement in Additional Paid in Capital represents a contribution by Carmel Capital to the Group as a shareholder and
reclassification of amounts arising on the recognition of interest free loans from the shareholder.
The movement during the year ended 30 November 2014, relates to share based payments which is dealt with in note 25.
The amortisation of lease intangibles is recognised in lease revenue, while the amortisation of maintenance intangibles is recognised
in depreciation and amortisation. During the year ended 30 November 2014, the amortisation of lease intangibles was USD 7.5 million
and the amortisation of maintenance intangibles was USD 8.8 million. The amortisation of intangibles for 2014, includes a one off
adjustment of USD 5.8 million in relation to the amortisation of the amount reclassified in respect of additions to intangibles in the
prior year.
20. Capital and reserves
Movements
In thousands of USD Amount Additional
LoanMovement Unwind
Received
Paid in
Liability Deferred Tax
of interest
Capital
through APIC
Consolidated
Reconciliation of movement in capital and reserves
Other reserve
513,780
– Received
In thousands of USD
Share Additional
Capital Available Profit and
Capital
Paid In Contribution For Sale Loss Capital Reserves Reserves
Total
Equity
17,000
– Repaid
(17,000)
513,780
1,723,152 541,112
583,594
6,185
(11,832) 2,842,211
15,000
– Repaid
– Reclassification of imputed interest
Profit for the year
-
-
-
-
72,379
72,379
-
-
-
12,121
-
12,121
Transactions with shareholders,
recorded directly in equity
Other reserve
-
14,689
-
-
-
14,689
-
-
4,066
-
-
4,066
1,723,152 555,801
587,660
18,306
At 30 November 2013
14,689
212
2,098
-
-
(329)
(2,084)
-
555,801
Other reserve
– Received
At 30 November 2012
541,112
60,547 2,945,466
Profit for the year
-
-
-
-
186,668
186,668
-
-
-
(18,306)
-
(18,306)
Other reserve
-
12,946
-
-
-
12,946
-
-
4,066
-
-
4,066
- (144,504)
-
-
144,504
-
1,723,152 424,243
591,726
-
12,946
204
1,849
-
(15,000)
-
(317)
(1,835)
-
-
(144,504)
-
-
-
513,780
424,243
During the year ended 30 November 2014, Carmel Capital advanced the Group an additional USD 15.0 million in interest free loans,
with no repayments due until loan maturity in 2063. The fair value of these loans when advanced was recognised as a loan balance
in the amount of USD 0.2 million net of deferred tax. The difference between face value and fair value of these loans is recognised as
an interest expense over their expected 50 year term. A loan repayment of USD 15.0 million was made during the year 30 November
2014, the difference between the amounts repaid and the loan carrying amounts are included as additional interest in finance
expenses.
At 30 November 2014
86
391,719 3,130,840
87
Company (continued)
During the year ended 30 November 2014, the Group reclassified a portion of the Additional paid in capital arising on the recognition
of interest free loans from Carmel Capital to profit and loss reserves of USD 144.5 million. The amount reclassified matched the total
imputed interest recognised to date in the statement of profit or loss and other comprehensive income in relation to these loans. This
had no impact on total equity.
The authorised share capital of the Company at 30 November 2014 and 30 November 2013 comprised 1,300,000,000 ordinary shares
of USD 1.00 par value each and 45,888,262,735 ordinary shares of USD 0.01 par value each.
with no repayments due until loan maturity in 2063. The fair value of these loans when advanced was recognised as a loan balance
in the amount of USD 0.2 million net of deferred tax. The difference between face value and fair value of these loans is recognised as
an interest expense over their expected 50 year term. A loan repayment of USD 17.0 million was made during the year 30 November
2013, the difference between the amounts repaid and the loan carrying amounts are included as additional interest in finance
expenses.
Capital risk management
Historically, the Group has financed its operations through a mixture of equity and debt, comprising of lines of credit, credit facilities
and, on and after October 18, 2010, Senior Secured Notes. The Group’s third-party indebtedness increased during the year ended 30
November 2014, to USD 7,271.6 million from USD 6,212.4 million in the previous year. The Group’s total equity increased by USD 185.4
million during the 2014 financial year to USD 3,130.8 million. The Group’s Debt to Equity ratio is 2.3:1 times as of 30 November 2014
compared to 2.1:1 times as of 30 November 2013.
The issued share capital of the Company at 30 November 2014 and 30 November 2013 comprised 1,264,269,739 ordinary shares of
USD 1.00 each issued and fully paid, and 45,888,262,735 ordinary shares of USD 0.01 each issued and fully paid.
The holders of ordinary shares are entitled to receive dividends as declared from time to time.
Further details of increase in profit for the year ended 30 November 2014 are disclosed in note 25(b).
Capital contribution:
The movement during the year ended 30 November 2014, relates to share based payments which is dealt with in note 25.
Additional paid in capital:
The sole shareholder has all powers and full voting rights as permitted under the applicable company laws. The movement in
Additional Paid in Capital represents a contribution by Carmel Capital to the Company as a shareholder and reclassification of
amounts arising on the recognition of interest free loans from the shareholder.
Movements
Company
In thousands of USD Reconciliation of movement in capital and reserves
Amount Additional
LoanMovement Unwind
Received
Paid in
Liability Deferred Tax
of interest
Capital
through APIC
In thousands of USD
Share
Capital
At 30 November 2012
1,723,152
Additional
Capital
Paid In Contribution
Capital 163,398
583,594
Profit and
Loss Reserves
Total
Equity
66,678
2,536,822
-
-
-
29,764
Other reserves -
14,688
-
-
14,688
-
-
4,066
-
4,066
1,723,152
178,086
587,660 96,442
2,585,340
Profit for the year
-
-
-
409,030
409,030
Other reserve
-
12,946--
12,946
-
-
4,066
-
4,066
-
(6,682)
-
6,682
-
1,723,152
184,350
591,726
512,154
3,011,382
At 30 November 2014
88
Other reserve
17,000
153,580
Other reserve
- Reclassification of imputed interest
29,764
At 30 November 2013
136,580
Profit for the year
163,398
14,688
212
2,098
-
178,086
15,000
12,946
204
1,849
-
-
(6,682)
-
-
-
168,580
184,350
During the year ended 30 November 2014, Carmel Capital advanced the Company an additional USD 15.0 million in interest free loans,
with no repayments due until loan maturity in 2063. The fair value of these loans when advanced was recognised as loan balance in
the amount of USD 0.2 million net of deferred tax. The difference between face value and fair value of these loans is recognised as an
interest expense over their expected 50 year term.
During the year ended 30 November 2014, the Company reclassified a portion of the Additional paid in capital arising on the
recognition of interest free loans from Carmel Capital to profit and loss reserves of USD 6.7 million. The amount reclassified matched
the total imputed interest recognised to date in the statement of profit or loss and other comprehensive income in relation to these
loans. This had no impact on total equity.
89
21. Loans and borrowings (continued)
Company (continued)
Additional paid in capital (continued)
Movements
During the year ended 30 November 2013, Carmel Capital advanced the Company an additional USD 17.0 million in interest free loans,
with no repayments due until loan maturity in 2063. The fair value of these loans when advanced was recognised as loan balance in
the amount of USD 0.2 million net of deferred tax. The difference between face value and fair value of these loans is recognised as an
interest expense over their expected 50 year term.
In thousands of USD Total
5,294,235
2,681,456*
Advanced during the year
Amortisation of fair value discounts
4,976
Interest accrued but not paid
21. Loans and borrowings
(2,259)
Repayment during the year
(1,766,026)*
Consolidated
6,212,382
The contractual terms of the Group’s interest-bearing loans and borrowings are:
2,696,418
Bank loans (repayable by instalment)
Principal
7,252,7646,201,611
Accrued and unpaid interest
25,298
21,092
Fair value discounts
(6,477) (10,321)
Total bank loans
7,271,585
6,212,382
Debt issuance costs
(141,538) (134,941)
Net loans and borrowings
7,130,047
6,077,441
Non-current liabilities
Bank loans
5,800,355
5,281,587
Debt issuance costs
(112,586) (103,951)
Non-current loans and borrowings
5,687,769
5,177,636
Current liabilities
Current portion of bank loans
Debt issuance costs
Current loans and borrowings
1,471,230
930,795
(28,952) (30,990)
1,442,278
899,805
Amortisation of debt issuance costs included in financing costs was USD 44.7 million (2013: USD 39.1 million) during the year ended
30 November 2014. The unamortised debt issuance costs at 30 November 2014 amortise over the term of the related borrowings.
90
Amortisation of fair value discounts
3,844
4,206
(1,645,265)
7,271,585
*Includes grossed up non-cash balances resulting from re-pricing activities disclosed further in this note.
Terms and conditions of outstanding loans before impact of derivatives at 30 November 2014 were as follows:
In thousands of USD
Floating rate loans
Average Nominal
Interest rate Year of
2014
Maturity
%
Non-recourse obligations
2.59
2014-2026
1,327,303
Lines of credit 5.51
2014
99,000
Recourse
2.762016-2026452,017
Term Loan 2012
LIBOR (floor 0.75) +2.75
2018
284,459
Term Loan 2010
2016
350,786
LIBOR +2.25
2017
200,593
1.09
2023-2025
378,173
Revolving Credit Facility
Ex-Im / ECA
Fixed rate loans
4.67
2015-2026
2,353,141
Recourse obligations
4.54
2014-2026
289,970
Senior Secured Notes
7.00
2016
372,941
Term Loan 2014
4.87
2021
352,547
Ex-Im / ECA
2.95
2016-2026
810,655
Total interest bearing liabilities
7,271,585
91
Terms and conditions of outstanding loans before impact of derivatives at 30 November 2013 were as follows:
The aggregate principal repayment amounts of loans for each of the financial years subsequent to 30 November 2014 is as follows:
In thousands of USD
In thousands of USD
Average Nominal
Interest rate Floating rate loans:
Year of
2013
Maturity
%
2.65
2014-2025
1,137,262
Lines of credit 5.81
2014
178,467
Recourse
2.862014-2022120,043
Per statement of financial position
Contractual cash flow*
2014201320142013
Due within one year
1,521,952
Due between one and two years
910,577
1,775,587
1,140,921
1,241,036
1,422,973
1,455,621
1,600,976
Due between two and three years
854,907
1,077,405
1,011,655
1,222,778
Due between three and four years
978,431
529,939
1,098,492
625,512
2,260,717
2,908,540
2,431,588
Term Loan 2010
2016
393,241
Due after four years
2,656,438
Term Loan 2012
2018
338,508
Total
7,252,7646,201,6118,249,8957,021,775
1.00
2019-2025
482,500
*Contractual cash flows include both scheduled payments of principal and interest after impact of derivatives.
LIBOR + 3.25
2016
230,658
Ex-Im / ECA
Warehouse Facility
Fixed rate loans:
4.89
2014-2024
2,085,747
4.46
2014-2022
105,274
7.00
2016
431,061
Ex-Im / ECA
3.04
2016-2025
709,621
Total interest bearing liabilities
6,212,382
Number of aircraft used as collateral for the following facilities
As of 30 November 2014, 134 aircraft (30 November 2013: 115 aircraft) were being financed by 41 commercial banks (30 November
2013: 36 banks), on a non-recourse basis. All of the loans contain provisions that require the payment of principal and interest
throughout the terms of the loans. The interest rates on the loans are based on fixed rates of between 1.55% and 12.00% and 1, 3 or 6
month LIBOR plus margins ranging from 45 bps to 450 bps on the variable rate loans.
As of 30 November 2014, 21 aircraft (30 November 2013: 9 aircraft) were being financed by 11 commercial banks and one insurance
company (30 November 2013: 6 banks and 1 insurance company), on a full recourse basis. The loans amortise over their lives of
between 1 and 11.5 years remaining and bear interest at a fixed rate between 2.48% and 6.08%, or 1, 3 or 6 month LIBOR plus margins
ranging from 220 bps to 320 bps on the variable rate loans.
20142013
Facility:
Term Loan 2014
134
115
Recourse
219
Term Loan 2014
10
-
Term Loan 2012
11
11
Term Loan 2010
26
26
Ex-Im / ECA
36
33
-
7
41
48
Warehouse Facility
Total
In October 2014, AWAS entered into a USD 350.0 million Term Loan Credit Agreement which carries a fixed rate of interest of 4.87%
and matures in 2021. The Term Loan 2014 requires periodic payment of principal plus interest and amortises to a bullet repayment in
October 2021. A substantial part of the proceeds of Term Loan 2014 were used to repay the Warehouse Facility. As of 30 November
2014, 10 aircraft were being financed with the proceeds of Term Loan 2014.
Term Loan 2012
In July 2012, AWAS entered into a USD 360.0 million Term Loan Credit Agreement. The Term Loan 2012 requires periodic payment of
principal plus interest and amortises to a bullet repayment in July 2018.
279249
10 aircraft classified as interest in aircraft are included in the 30 November 2013 numbers above. In addition to the number of aircraft
above, 35 aircraft (2013: 27 aircraft) were unencumbered.
All these facilities contain various customary financial and non-financial loan covenants including:
•• Financial information obligations;
•• Limitations on activities which would negatively impact concentration limits such as regional location of lessees and types of
aircraft in the portfolio; and
•• Loan to value maintenance ratio covenant.
92
93
Term Loan 2012 (continued)
Ex-Im Bank and ECA backed facilities (continued)
During the year ended 30 November 2013, the Group concluded a series of arrangements to re-price USD 347.8 million then
outstanding (the “2013 New Facility”) of the USD 356.6 million Term Loan facility entered into in October 2012 (the “2012 New
Facility”). The arrangements required the exercise of a prepayment clause in the 2012 New Facility under which the Group paid a fee
of approximately USD 3.5 million. The 2013 New Facility was entered into with a syndicate comprising over 95% of the lenders under
the 2012 New Facility and a number of new lenders. The arrangements have been accounted for as a de-recognition of the 2012 New
Facility and the recognition of the 2013 New Facility.
As of 30 November 2014, 22 aircraft (30 November 2013: 19) were being financed with the proceeds of a loan guaranteed by one of
the ECA’s, on standard export agency supported financing terms whereby the subject loan is amortised quarterly over the period of
11 years from date of drawdown, with interest accruing at fixed rates between 2.52% and 5.06%, and floating rates of 3 month LIBOR
plus a margin ranging from 67.5 bps to 115 bps. The Ex-Im and ECA loan documentation contain covenants and events of default
customary for export credit agency supported financings.
The fees associated with the exercise of the prepayment clause and unamortised costs incurred in entering into the Existing Facility
were expensed in the year entering into the new facility. The movements attributable to these arrangements have not been reflected
in the consolidated statement of cash flows.
Warehouse
The Term Loan 2012 accrues interest at a rate of 3 month LIBOR plus a margin of 2.75%, with a LIBOR floor of 0.75%. As of 30 November
2014, 11 aircraft were being financed with the proceeds of Term Loan 2012 (30 November 2013: 11).
During the year ended 30 November 2014, the Group repaid the Warehouse Facility using the proceeds from Term Loan 2014. The
Group originally entered into a USD 500.0 million limited recourse, Warehouse Facility in June 2011 which could be drawn within a
two and a half year period (originally was a two year drawing period) from its effective date. Borrowings under the Warehouse Facility
were secured by collateral including mortgages over the aircraft assets and pledges of ownership interest in the aircraft.
Term Loan 2010
Revolving Credit Facility
In June 2010 AWAS entered into a USD 530.0 million Term Loan Credit Agreement. The Term Loan requires periodic payment of
principal plus interest and amortises to a bullet repayment in June 2016.
In April 2014, the Group entered into a USD 435.0 million full recourse unsecured revolving credit facility (the “Revolving Credit
Facility”), which can be drawn within a three year period from its effective date. The Revolving Credit Facility accrues interest at LIBOR
plus applicable rate, which is determined using The Group’s current credit rating. The facility matures in April 2017. As at 30 November
the interest rate was LIBOR plus 2.25% and USD 200.0 million was drawn from this facility.
During the year ended 30 November 2013, the Group concluded a series of arrangements to re-price USD 411.1 million then
outstanding (the “New Facility”) of the USD 530.0 million Term Loan facility entered into in June 2010 (the “Existing Facility”). The
arrangements required the exercise of a prepayment clause in the Existing Facility under which the Group paid a fee of approximately
USD 4.2 million. The New Facility was entered into with a syndicate comprising over 95% of the lenders under the Existing Facility and
a number of new lenders. The arrangements have been accounted for as a de-recognition of the Existing Facility and the recognition
of the New Facility.
The fees associated with the exercise of the prepayment clause and unamortised costs incurred in entering into the Existing Facility
were expensed in the year of entering into the new facility. The movements attributable to these arrangements have not been
reflected in the consolidated statement of cash flows.
The Term Loan accrues interest at a rate of 3 month LIBOR plus a margin of 2.75%, with a LIBOR floor of 0.75%. As of 30 November
2014, 26 aircraft (30 November 2013: 26) were being financed with the proceeds of Term Loan 2010.
Ex-Im Bank and ECA backed facilities
As of 30 November 2014, 14 aircraft (30 November 2013: 14) were being financed with the proceeds of loans guaranteed by the Ex-Im
Bank on standard export credit agency supported financing terms whereby the subject loans are amortised monthly or quarterly over
the period of 11 years from date of drawdown, with interest accruing at fixed rates of between 1.28% and 6.73%, and floating rates of
3 month LIBOR plus margins up to 40 bps.
94
In October 2010, the Group issued USD 600.0 million Senior Secured Notes which carry a fixed rate of interest of 7.00% and mature in
2016. These Notes are included in fixed rate loans. The Notes amortise on a semi-annual basis with the final payment of principal of
USD 283.2 million in October 2016. These notes are guaranteed, on a joint and several basis, by the subsidiary guarantors that hold
either the ownership or lease interest in the collateral and certain other subsidiaries. The notes and guarantees are secured by firstpriority interests in the collateral. Notes rank equally in right of payment with all existing and future subordinated indebtedness. As at
30 November 2014, 41 aircraft (30 November 2013: 48 aircraft) were being financed with the proceeds from this facility.
Lines of credit
As of 30 November 2014, the Group had in place two Pre-delivery Payment (PDP) facilities (30 November 2013: 3) in the amount of
USD 99.0 million (30 November 2013: USD 178.5 million) to which the applicable PDP lenders provide facilities to be used in funding
pre-delivery payments for aircraft the Group has ordered. The facilities are secured by security assignments of the buyer’s right under
the related purchase agreements to purchase the aircraft which are subject to the financing. The PDP facilities bear interest at floating
rates based on 1 month LIBOR plus margins ranging from 200 bps to 595 bps. The Group’s PDP facilities have been utilised to cover
nine aircraft (30 November 2013: 23 aircraft). As is typical for such facilities, interest accrues on the outstanding balance of each such
loan until repayment of the concerned loan with the repayment being due on the date of delivery of the concerned aircraft.
95
Company
Company (continued)
The contractual terms of the Company’s interest-bearing loans and borrowings are:
The facility contains various customary financial and non financial loan covenants including:
•• Financial information obligations;
In thousands of USD
20142013
Bank loans (repayable by instalment)
•• Limitations on activities which would negatively impact concentration limits such as regional location of lessees and types of
aircraft in the portfolio; and
Principal
394,600447,200
Accrued and unpaid interest
Total bank loans
Debt issuance costs
Net loans and borrowings
In thousands of USD
3,346
3,900
397,946
451,100
(3,207) (4,611)
394,739
446,489
20142013
Bank loans
Debt issuance costs
Non-current loans and borrowings
337,000
369,600
(1,408) (2,761)
335,592
366,839
•• Loan to value maintenance ratio covenant.
The aggregate principal repayment amounts of loans for each of the fiscal years subsequent to 30 November 2014 is as follows:
In thousands of USD
Per Statement of financial position
Contractual cash flow*
2014201320142013
57,600
77,600
83,169
106,572
337,000
57,600
357,949
82,464
Due between two and three years
-
312,000
-
332,832
Due between three and four years
-
-
-
-
-
-
-
-
Due within one year
Due between one and two years
Due after four years
Total
394,600447,200441,118521,868
*Contractual cashflows include both scheduled payments of principal and interest.
Current liabilities
Current portion of bank loans
60,946
81,500
Debt issuance costs
(1,799) (1,850)
Current loans and borrowings
59,147
79,650
In October 2010, the Company issued USD 600.0 million Senior Secured Notes which carry a fixed rate of interest of 7.0% and mature
in 2016. The Notes amortise on a semi-annual basis with the final payment of principal of USD 283.2 million in October 2016. These
notes are guaranteed, on a joint and several basis, by the subsidiary guarantors that hold either the ownership or lease interest in the
collateral and certain other guarantors. The notes and guarantees will be secured by first-priority interests in the collateral. Notes rank
equally in right of payment with all of the existing and future subordinates indebtedness.
Amortisation of debt issuance costs was USD 1.9 million during the year ended 30 November 2014 (2013: USD 2.3 million). The
unamortised debt issuance costs at 30 November 2014 amortise over the term of the related borrowing, which matures on
October 2016.
Movements
In thousands of USD
Total
509,219
-
Interest accrued and paid
(519)
(57,600)
451,100
25,000
Interest accrued and paid
(554)
(77,600)
397,946
96
97
22. Maintenance advances and liabilities
23. Trade and other payables
In thousands of USD
20142013
Long term maintenance reserves
689,137
575,772
Current maintenance reserves
129,227
132,525
Total maintenance advances and liabilities
818,364
708,297
In thousands of USD
Balance at Additions
30 November 2013
Releases
Drawdowns
Balance at 30
November 2014
In thousands of USD
20142013
Employee benefits
25,031
16,912
Deferred lease revenue
81,048
61,806
Deposits held
15,952
17,901
Other liabilities and accruals
31,646
27,497
153,677
124,116
Total current trade and other payables
575,034
281,608
(183,564)*
673,078
109,235
44,046
(24,966)*
128,315
In thousands of USD
20142013
Repossessions provisions
4,906
10,271
(10,659)
4,518
Employee benefits
7,420
12,042
Re-lease provisions
6,782
17,147
(18,384)*
5,545
Deposits held
199,611
168,310
Heavy maintenance
12,340
10,280
(15,712)
6,908
Total non-current trade and other payables
207,031
180,352
Total
708,297 363,352(253,285) 818,364
*Including USD 7.0 million transferred to liabilities held-for-sale.
In thousands of USD
Balance at Additions
30 November 2012
Releases
Drawdowns
Balance at 30
November 2013
523,797
257,208
(205,971)*
575,034
155,444
20,554
(66,763)*
109,235
10,722
8,382
(14,198)*
4,906
Repossessions provisions
Re-lease provisions
3,451
22,368
(19,037)*
6,782
Heavy maintenance
13,642
15,382
(16,684)
12,340
Total
707,056 323,894(322,653) 708,297
*Including USD 6.9 million transferred to liabilities held-for-sale.
Deposits held relate to cash security received with respect to 234 aircraft and one spare engine (2013: 222 aircraft and 2 spare
engines). In addition, the Group holds security on lease obligations in the form of letters of credit in the amount of USD 132.3 million
as of 30 November 2014 (2013: USD 128.4 million). Security deposits are refundable at the end of the contract lease period after all
lease obligations have been met by the lessee.
Employee benefits
Certain entities within the Group sponsor employee defined contribution superannuation and 401(K) schemes in various countries.
The total expense to the Group in 2014 was USD 2.5 million (2013: USD 2.4 million).
The Group also has employee bonus plans. The total expense included in general and administrative expenses related to the bonus
plans was USD 12.7 million (2013: USD 12.8 million) during the year ended 30 November 2014. As of 30 November 2014 an amount of
USD 15.1 million (2013: USD 15.6 million) had been accrued and included as employee bonus accrual in trade and other payables.
24. Financial instruments and financial risk management
Consolidated
The Group utilises financial instruments to reduce exposures to market risks throughout its business. Equity, borrowings and cash and
cash resources are used to finance the Group’s operations. Derivative financial instruments are contractual agreements with a value
which reflects price movements in an underlying variable. The Group uses derivative financial instruments, principally interest rate
swaps and caps, to manage interest rate risks and achieve the desired profile of borrowings.
98
99
24. Financial instruments and financial risk management (continued)
The main risks attaching to the Group’s financial instruments are disclosed in note 27.
a) Fair value of financial assets and liabilities (continued)
a) Fair value of financial assets and liabilities
The carrying value and fair value of the Group’s financial assets and liabilities by class and category were as follows:
In thousands of USD
Instruments at fair value Loans and
Carrying
Fair value
through profit and loss
receivables
amount
2014201420142014
Cash and cash equivalents*
-
Restricted cash*
-249,586249,586
229,856
229,856
-
-
778
-
778
778
Trade and other receivables*
-
27,399
27,399
-
-37,19837,19837,198
Loan to shareholder
-5,7395,7395,220
Financial assets 2014
778
549,778
550,556
43,196
External borrowings
-7,130,0477,130,0477,256,894
Borrowings from shareholder
-
60,404
60,404
135,401
9,651
-
9,651
9,651
Financial liabilities 2014
9,6517,190,4517,200,1027,401,946
* The Group has not disclosed the fair value of certain financial instruments because their carrying amounts are a reasonable
approximation of fair values due to their short-term or on demand nature.
In thousands of USD
Instruments Instruments Loans and
Carrying
Fair value
at fair value at fair value
receivables
amount
through profit through other
and loss comprehensive
income
20132013201320132013
-
-
Restricted cash*
-
-199,712199,712
-20,921
242,879
242,879
-
-
-20,92120,921
1,671
-
-
1,671
1,671
-
-
29,644
29,644
-
-
-17,57517,57517,575
Loan to shareholder
-
-5,2835,2835,283
1,671
20,921
495,093
517,685
45,450
External borrowings
-
-6,077,4416,077,4416,219,900
-
-
6,534
-
-
6,534
6,534
6,534
-
6,128,166
6,134,700
6,358,368
50,725
50,725
131,934
* The Group has not disclosed the fair value of certain financial instruments because their carrying amounts are a reasonable
approximation of fair values due to their short-term or on demand nature.
100
101
b) Accounting classifications and fair values
c) Derivative financial instruments
The following table presents the group’s financial assets and liabilities that are measured at fair value at 30 November 2014 and 30
November 2013.
The objective of the Group’s interest rate risk management policy is to adopt a risk averse position with respect to changes in interest
rates and to match, when feasible, lease income subject to fixed / variable rates to loan financing.
In thousands of USD
Fair value
2014
Level 1
Fair Value Level
Level 2
Level 3
-
778
-
37,198
37,198
778
Loan to shareholder
5,220
-
5,220
-
43,196
-
43,196
-
External borrowings
In thousands of USD
7,256,894-
7,256,894-
135,401
-
135,401
-
9,651
-
9,651
-
7,401,946
-
7,401,946
-
Fair value
2013
Level 1
Fair Value Level
Level 2
Level 3
20,921
20,921
1,671
-
1,671
17,575
17,575
-
Accordingly, the Group employs derivative financial instruments, principally interest rate swap and cap contracts, to hedge the current
and expected future interest rate payments on the Group’s variable rate debt. Interest rate swaps are agreements in which a series
of interest rate flows are exchanged with a third party over a prescribed period. The notional amount on a swap is not exchanged.
Under the swap transactions the Group makes fixed rate payments and receives floating rate payments to convert the floating rate
borrowings to fixed rate obligations to better match the largely fixed rate cash flows from the leasing of aircraft. An interest rate cap
is designed to hedge a company’s maximum exposure to upward interest movements. It establishes a maximum total dollar interest
amount that will be paid out over the life of the cap. The Group pays an initial premium and will receive payments each settlement
period in which the interest rate exceeds the strike price.
The counterparties to these agreements are highly rated financial institutions. In the event that the counterparties fail to meet the
terms of the interest rate swap contracts, the Group’s exposure is limited to the interest rate differential on the notional amount at
each settlement period over the life of the agreements. The Group does not anticipate any non-performance by the counterparties.
During the year ended 30 November 2014, the change in the fair value of the swaps recorded in finance expense was a USD 3.1
million loss (2013: USD 3.5 million gain). The fair value liability of the interest rate swaps at 30 November 2014 was based on broker
quotes and was a liability of USD 9.6 million (2013: USD 6.5 million). The change in fair value of the cap recorded as a finance expense
was USD 0.9 million loss (2013: USD 0.3 million gain). The fair value of the interest rate cap at 30 November 2014 was based on
observable market prices and was an asset of USD 0.8 million (2013: USD 1.7 million).
All of the Company’s derivatives are carried at fair value and are classified as Level 2. The different levels have been defined as follows:
•• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
•• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as
Loan to shareholder
5,283
-
5,283
-
45,450
-
45,450
-
prices) or indirectly (i.e. derived from prices).
•• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
External borrowings
6,219,900-
6,219,900-
131,934
-
131,934
-
6,534
-
6,534
-
6,358,368
-
6,358,368
-
There were no transfers between levels during the years. As disclosed in note 24 (a), the fair value hierarchy has not been disclosed for
certain financial instruments due to their short-term or on demand nature.
Financial instruments in Level 2
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined
by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and
rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the
instrument is included in level 2. The Group’s valuation technique is discounted cashflows using market rates allowing for credit risk
and broker quotes for derivatives.
102
103
Company
c) Derivative financial instruments (continued)
a) Fair value of financial assets and liabilities
As at 30 November 2014 the Group had the following derivatives:
The Company utilises financial instruments to reduce exposures to market risks throughout its business. Borrowings and cash and
cash equivalents are used to finance the Company’s operations.
Derivative Type
The carrying value and fair value of the Company’s financial assets and liabilities by class and category were as follows:
Notional amount
In thousands of USD
Pay ReceiveMaturity
Swap:
71.5
0.42% – 1.94%
USD LIBOR
2015
76.9
1.78%
USD LIBOR
2016
In thousands of USD
53.6
2.82% – 4.08%
USD LIBOR
2017
55.9
1.0% – 1.08%
USD LIBOR
2018
-
210,786
210,786
-
-
1,332,501
1,332,501
1,290,376
Carrying
Fair value
receivables
amount
2014201420142014
27.2
1.20%
USD LIBOR
2019
27.0
3.30% – 5.13%
USD LIBOR
2020
Loan to shareholder
-5,7395,7395,220
67.1
1.58% – 1.98%
USD LIBOR
2021
Receivables from related parties*
-
132.5
2.46% – 5.65%
USD LIBOR
2023
-1,914,6231,914,6231,295,596
29.9
2.21% – 2.92%
USD LIBOR
2024
32.5
2.62%
USD LIBOR
2025
External borrowings
38.4
2.34%
USD LIBOR
2026
365,597
365,597
-
-394,739394,739433,150
-
9,055
9,055
43,384
Payable to related parties*
-
871,944
871,944
-
-
1,275,738
1,275,738
476,534
Cap:
76.9 2.00% Strike Price
2016
199.0 1.75% Strike Price
2017
d) Available-for-sale financial assets
During the year ended 30 November 2014, the Group sold its rights to certain claims, which were previously recognised as availablefor-sale financial assets. The proceeds of these claims are recorded as other income in the statement of comprehensive income.
Available-for-sale financial assets comprised estimated values of approved claims arising from lessee bankruptcies and restructurings.
At the 30 November 2013, the Group recognised available-for-sale financial assets of USD 20.9 million in this regard.
Movements
In thousands of USD
Carrying
Fair value
receivables
amount
2013201320132013
-
223,559
223,559
-
-
1,069,182
1,069,182
1,069,182
Loan to shareholder
-5,2835,2835,283
7,069
External borrowings
(14,617)
20,921
Changes in fair value
648
Transferred to the income statement
(21,569)
104
368,689
368,689
-
-
-1,666,7361,666,7361,074,465
Transferred to the income statement
-
Receivables from related parties*
Total
28,469
23
In thousands of USD
Changes in fair value
23
-446,489446,489511,176
-
6,066
6,066
38,761
Payable to related parties*
-
781,397
781,397
-
-
1,233,952
1,233,952
549,937
* The Company has not disclosed the fair value for the financial instruments such as loan to related parties because their carrying
amounts are a reasonable approximation of fair values.
-
105
25. Related party transactions
Company
Significant subsidiaries and registered offices
b) Accounting classifications and fair values
Shareholding
Country of
incorporation
The following table presents the group’s financial assets and liabilities that are measured at fair value at 30 November 2014 and 30
November 2013.
In thousands of USD
Fair value
2014
Level 1
Fair Value Level
Level 2
Level 3
1,290,376
-
1,290,376
-
Loan to shareholder
5,220
-
5,220
-
1,295,596
-
1,295,596
-
External borrowings
433,150-
433,150-
AWAS Aviation Acquisitions Limited*
100%
Ireland
AWAS Aviation Trading Limited**
100%
Ireland
AWAS (Ireland) Limited ***
100%
Ireland
AWAS Aviation Investments Limited **
100%
Ireland
AWAS Aviation Finance Limited***
100%
Ireland
AWAS Capital Inc. ****
100%
USA
Pegasus Aviation Finance Company*****
100%
USA
AWAS Acquisitions LLC
100%
USA
70 Sir John Rogerson’s Quay, Dublin 2, Ireland
43,384
-
43,384
-
c/o Intertrust Corporate Services Delaware Limited
476,534
-
476,534
-
200 Bellevue Parkway, Suite 210
Fair value
2013
Level 1
Fair Value Level
Level 2
Level 3
Wilmington, Delaware 19809, USA
In thousands of USD
AWAS Consolidated Holdings Limited
100%
Cayman
1,069,182
-
1,069,182
-
AWAS Aviation Holdings Limited**
100%
Cayman
Loan to shareholder
5,283
-
5,283
-
Cricket Square, Hutchins Drive, PO Box 2681
1,074,465
-
1,074,465
-
Grand Cayman, KY1-1111, Cayman Islands
External borrowings
511,176-
511,176-
AWAS Finance Luxembourg 2014 S.A******
100%
Luxembourg
38,761
-
38,761
-
AWAS Finance Luxembourg 2012 S.A******
100%
Luxembourg
549,937
-
549,937
-
AWAS Finance Luxembourg S.A*******
100%
Luxembourg
Rue Eugène Ruppert 19, L-2453 Luxembourg
There were no transfers between levels during the years. As disclosed in note 24 (a), the fair value hierarchy has not been disclosed for
certain financial instruments due to their short-term or on demand nature.
* – shareholdings held via AWAS Aviation Investments Limited
** – shareholding held via AWAS Consolidation Holdings Limited
Financial instruments in Level 2
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is
determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is
available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are
observable, the instrument is included in level 2. The Company’s valuation technique is discounted cashflows using market rates
allowing for credit risk.
*** – shareholdings held via AWAS Aviation Acquisitions Limited
**** – shareholdings held via AWAS Holdings Inc.
***** – shareholdings held via AWAS Acquisitions Inc.
****** – shareholdings held via AWAS Aviation Trading Limited
******* – shareholdings held via AWAS Aviation Holdings Limited
The principal activity of the above entities is the sale and leasing of aircraft and provision of administrative services to related parties.
Information related to all other subsidiary entities will be filed with the Company’s annual return as provided for by Section 16 (3) (a)
of the Companies (Amendment) Act, 1986.
106
107
25. Related party transactions (continued)
Consolidated
Our shareholder is Carmel Capital Sarl, which is owned by investment funds managed by Terra Firma Investments (GP) 2 Limited
and Terra Firma Investments (GP) 3 Limited, and by CPPIB. The Group consider Terra Firma Holdings Limited; a Guernsey registered
company, to be the ultimate parent company and Mr Guy Hands to be the ultimate controlling party.
Terms and conditions of outstanding loans were as follows:
Borrowings from shareholders (repayable other than by instalment)
In thousands of USD
20142013
Proceeds initially recognised as a liability
6,210
6,323
Accreted and unpaid interest
54,194
44,402
Total loans from shareholders
60,404
50,725
Related party loan
60,404
50,725
Movements
In thousands of USD
Total
41,016
17,000
9,709
(17,000)
50,725
15,000
9,679
(15,000)
60,404
In thousands of USD
Amount
Year of
Repayable on
Maturity
Maturity Carrying Value at
30 November
2014
Carmel Capital Loan – AAIL 345,200
2058
51,349
Carmel Capital Loan – AACL Tranche 2
136,580
2059
8,302
Carmel Capital Loan – AACL Tranche 5
32,000
2063
753
Total
513,78060,404
The loans above are interest free and have no scheduled repayment due until the year of maturity, when the entire principal balance
outstanding is due and payable. Early repayments are permitted. Interest has been imputed on this loan at a rate of 9.16% and is
recorded as accrued and unpaid interest.
During the year ended 30 November 2014, there was a movement in the share based payment reserve of USD 4.1 million relating to
share based payment. The balance as at 30 November 2013 was USD 16.3 million. This scheme is detailed further in this note.
There were no transactions, and there are no outstanding balances, relating to key management personnel and / or entities over
which they have control or significant influence.
During the year ended 30 November 2014 the Company, acting as lender, entered into a five year long Intercompany Interest Bearing
Loan Agreement with Carmel Capital. The amount lent to Carmel Capital under the agreement was USD 0.2 million and loan maturity
is 2019. Interest is calculated at the rate of 5.0% annually on the amount of the loan outstanding starting on the effective date. Interest
accrued at 30 November 2014 was USD 8.0 thousand.
During the year ended 30 November 2012 the Company, acting as lender, entered into an Intercompany Interest Bearing Loan
Agreement with Carmel Capital. The amount lent to Carmel Capital under the agreement was USD 4.9 million. Interest is calculated at
the rate of 5.0% annually on the amount of the loan outstanding starting on the effective date. Interest accrued during the year ended
30 November 2014 was USD 0.6 million (2013: USD 0.4 million).
with no repayments due until loan maturity in 2063. The fair value of these loans when advanced was recognised as loan balances in
the amount of USD 0.2 million net of deferred tax. In addition, during the year ended 30 November 2014, loan repayments of USD 15.0
million were made, the difference between the amounts repaid and the loan carrying amounts are included as additional interest in
finance costs.
with no repayments due until loan maturity in 2063. The fair value of these loans when advanced was recognised as loan balances in
the amount of USD 0.2 million net of deferred tax. In addition, during the year ended 30 November 2013, loan repayments of USD 17.0
million were made, the difference between the amounts repaid and the loan carrying amounts are included as additional interest in
finance costs.
108
109
Remuneration of key management personnel
Remuneration of key management personnel (continued)
Certain key management personnel have entered into incentive arrangements (the “Incentive Scheme”) with the Group, which have
been accounted for under IFRS 2 “Share Based Payment”. Members of the Incentive Scheme were awarded share appreciation rights
based upon the fair value of the Group at the commencement date (the “Initial Valuation”).
The remuneration of the key management personnel of the Group, which includes Directors and certain members of the
management team, is set out below in aggregate for each of the categories specified in IAS 24 “Related Party Disclosures” and IFRS 2
“Share Based Payment”.
Benefits under the scheme are payable within 60 days following one of a number of specified trigger events, comprising the earlier of
a disposal of the Group by the shareholder or a long stop date (as defined in the terms of the Incentive Scheme). Amounts recognised
in the financial statements are determined with reference to a notional profit or loss, calculated in accordance with a predetermined
methodology, representing the increase or decrease in the value of the Group at year end compared with the Initial Valuation. The
Incentive Scheme incorporates additional rewards based upon the Group achieving a target compound growth rate between the
Initial Valuation and the occurrence of a specified trigger event. The assumed expected term used in estimating the Initial Valuation of
the Incentive Scheme is four years.
As members of the Incentive Scheme are paid their entitlements directly by the Shareholder, the corresponding entry to the expense
is recognised as a capital contribution through equity in the consolidated statement of financial position. The Incentive Scheme is
therefore accounted for as an equity-settled share-based payment and the fair value of the equity instruments granted is estimated at
inception using the expected ultimate cost to the Shareholder.
During the year ended 30 November 2013, one member left the Incentive Scheme and was replaced under identical contractual
terms midway through the expected term of four years. The assumptions used in the Initial Valuation have not changed and the
adjustments required to reflect the above movements result in no change to the annual charge or the corresponding amount
recognised in equity.
In addition, certain key management personnel are members of bonus plans (the “Bonus Plans”), which have been accounted for
under IAS 19 “Employee Benefits”. Payments are calculated based on a percentage of the executive’s total compensation and / or a
percentage of target bonus and are payable within 30 days following one of a number of specified trigger events, comprising the
earlier of a disposal of the Group by the shareholder or a long stop date (as defined in the terms of the Bonus Plan). A discount rate of
5.3% is applied for 2014 (2013: 5.3%).
The expected total costs of the Incentive Scheme and the Bonus Plans are accrued over a number of years to the earliest expected
trigger event that has been assumed to be the most likely to occur. In each case, the expense recognised during the year ended 30
November 2014, represents the current portion of the expected total cost to the Group.
110
In thousands of USD
20142013
Short term employee benefits
-
-
Long term employment benefits
4,053
3,316
4,066
4,066
Total expenses
8,119
7,382
Short term employee benefits include contracted payments to key management personnel to fund private pension plans. The Group
does not provide any pension benefits for key management personnel. The carrying amount of liabilities in relation to the incentive
and bonus plans for key management personnel is set out below in accordance with IAS 24 “Related Party Disclosures” and IFRS 2
“Share Based Payment”.
In thousands of USD
20142013
Short term employee benefits
-
-
Long term employment benefits
16,096
12,042
Total liabilities
16,096
12,042
In thousands of USD
20142013
16,264
12,198
Total equity
16,264
12,198
111
Company
Company (continued)
Our shareholder is Carmel Capital Sarl, which is owned by investment funds managed by Terra Firma Investments (GP) 2 Limited
and Terra Firma Investments (GP) 3 Limited, and by CPPIB. The Group consider Terra Firma Holdings Limited; a Guernsey registered
company, to be the ultimate parent company and Mr Guy Hands to be the ultimate controlling party.
b) Income
a) Investments in subsidiary undertakings
During the year ended 30 November 2014 the Company received USD 29.7 million of interest income from related AWAS entities,
ACHL and AATL (2013: USD 31.6 million). In addition, USD 30.3 million was received from AWAS Aviation Finance Limited as a result of
recharge of interest expense and amortisation of debt issuance costs associated with Senior Secured Notes (2013: USD 34.8 million).
In thousands of USD
In addition, during the year ended 30 November 2014 the Company received a dividend of USD 385.3 million from its subsidiary,
ACHL.
At 30 November 2012
1,764,400
255,309
Additional contribution
RepaymentAt 30 November 2013
2,019,709
367,578
Additional contribution
RepaymentAt 30 November 2014
2,387,287
c) Expense
During the year ended 30 November 2014 the Company incurred interest expense relating to loan from shareholders of USD 2.8
million (2013: USD 2.4 million).
d) Balances with related parties
Balances with related parties:
In thousands of USD
Investments in subsidiaries include shares at cost less impairment charges in:
20142013
Receivables:
In thousands of USD
20142013
AWAS Acquisitions LLC.
533,959
533,959
AWAS Consolidated Holdings Limited
1,853,328
1,485,750
Total
2,387,2872,019,709
Receivables from other group companies
Total
1,332,501
1,069,182
365,597
368,689
1,698,0981,437,871
Payables:
The Directors periodically review the carrying values of investments in subsidiaries without formally revaluing them. In performing this
review the Directors take account of, inter alia, the trading performance, net worth of individual subsidiaries and impairment trigger
events. During year ended 30 November 2014 no impairment trigger was identified (2013: none).
Loans from related parties
9,055
6,066
Payable to other group companies
871,944
781,397
Total
880,999787,463
Investments in AAIL and AATL, which were previously direct investments, are now held via ACHL.
Investments in subsidiaries increased by USD 367.6 million during the year ended 30 November 2014. The investment in ACHL
increased by USD 317.0 million as ACHL was released from an obligation to repay certain interest free loans advanced by AACL with
an aggregate value of USD 1,369.6 million. This resulted in a net increase in investment in ACHL due to certain balances previously
classified as interest accrued, loan asset and deferred tax being reclassified as investment in subsidiary. In addition, the investment
in ACHL increased by USD 46.5 million due to an increase in the interest free portion of the loan to AATL of USD 46.5 million. An
additional increase of USD 4.1 million is related to share based payments which are dealt with in further detail above.
The loans from related parties are interest free and have no scheduled repayment due until the year of maturity in 2059 and 2063,
when the entire principal balance outstanding of USD 168.6 million is due and payable. Early repayments are permitted. Interest has
been imputed on this loan at a rate of 9.16% and is recorded as accrued and unpaid interest.
During the year ended 30 November 2014, the Company, acting as lender, entered into an Intercompany Interest Bearing Loan
Agreement with ACHL. The amount lent to ACHL under the agreement was USD 385.3 million and loan maturity is 2018. Interest is
calculated at the rate of 4.2% annually, interest accrued at 30 November 2014 was USD 3.4 million.
During the year ended 30 November 2014 the Company, acting as lender, entered into a five year Intercompany Interest Bearing Loan
Agreement with Carmel Capital. The amount lent to Carmel Capital under the agreement was USD 0.2 million and loan maturity is
2019. Interest is calculated at the rate of 5.0% annually on the amount of the loan outstanding starting on the effective date. Interest
accrued at 30 November 2014 was USD 8.0 thousand.
112
113
26. Commitments and contingent liabilities (continued)
Company (continued)
Consolidated
c) Balances with related parties (continued)
b) Contingent liability
During the year ended 30 November 2014 the Company, acting as lender, entered into a three year Intercompany Interest Bearing
Loan Agreement with AATL. The amount lent to AATL under the agreement was USD 25.0 million and loan maturity is 2018. Interest is
calculated at the variable rate of LIBOR plus 3.1%. Interest accrued at 30 November 2014 was USD 0.8 million.
A contingent loss exists at 30 November 2014 in relation to unpaid Eurocontrol charges incurred by operators of the Group’s aircraft.
During the year ended 30 November 2012 the Company, acting as lender, entered into an Intercompany Interest Bearing Loan
Agreement with Carmel Capital. The amount lent to Carmel Capital under the agreement was USD 4.9 million. Interest is calculated at
the rate of 5.0% annually on the amount of the loan outstanding starting on the effective date. Interest accrued during the year ended
30 November 2014 was USD 0.6 million (2013: USD 0.4 million).
Receivables and payables with related parties represent advances that are unsecured and have no fixed term of repayment as at
30 November 2014. There were no transactions and there are no outstanding balances relating to key management personnel and
entities over which they have control or significant influence.
The Agreement provides that where a debtor has not paid the amount due, measures may be taken by Eurocontrol to enforce
recovery. The measures available to Eurocontrol are subject to national law in each of the Eurocontrol Member States and in some
jurisdictions include the ability to arrest and detain an aircraft pending recovery of unpaid charges. The Group as owner of the aircraft
may become liable for Eurocontrol costs in the event that an operator defaults on their Eurocontrol obligations.
No accrual has been made at 30 November 2014 (30 November 2013: nil) in relation to contingent liabilities pertaining to Eurocontrol
charges as any potential liability is not considered probable at this time, and the amount of any potential liability cannot be
reasonably estimated.
26. Commitments and contingent liabilities
Consolidated
Company
a) Capital commitments
At 30 November 2014, the Group had committed to purchase 16 new aircraft scheduled to deliver from 1 December 2014 through to
2018. All of these purchase commitments to purchase new aircraft are based upon master agreements with Airbus S.A.S. (“Airbus”).
The Airbus aircraft (models A320 and A350XWB) are being purchased pursuant to an agreement executed by Group companies with
Airbus. This agreement establishes the pricing formulas, (which include certain price adjustments based upon inflation and other
factors), and various other terms with respect to the purchase of aircraft. Under certain circumstances, there is the right to alter the
mix of aircraft type ultimately acquired.
In addition, the Group is committed to the purchase of four aircraft from airlines.
The total capital commitment at 30 November 2014 is USD 1,064.0 million (30 November 2013: USD 2,348.1 million).
The Directors anticipate that a portion of the aggregate purchase price for the purchase of aircraft will be funded by incurring
additional debt. The exact amount of the indebtedness to be incurred will depend upon the actual purchase price of the aircraft,
which can vary due to a number of factors, including inflation, and the percentage of the purchase price of the aircraft which must
be financed.
114
Eurocontrol’s Central Route Charges Office bills and collects charges from users of en-route services on behalf of Eurocontrol
Member States pursuant to a Multilateral Agreement (“the Agreement”). The Agreement, which came into force on 1 January 1986,
stipulates that the party liable for the payment of Eurocontrol charges is the operator of the aircraft at the time the relevant flight was
performed. If the identity of the operator is unknown and the owner fails to prove that another party is the operator, then the owner
will be treated as the operator.
Guarantees
The Company has guaranteed the obligations of its subsidiary, AATL under aircraft purchase agreements between AATL and Boeing,
and Airbus. The Company has also guaranteed the obligations of multiple subsidiaries, special purpose borrower entities, under loan
facilities for the financing of pre-delivery payments owed to Airbus.
The Senior Secured Notes are guaranteed, on a joint and several basis, by the subsidiary guarantors that hold either the ownership
or lease interest in the collateral and certain other guarantors. The notes and guarantees are secured by first-priority interests in the
collateral.
The Company has guaranteed the obligations of its subsidiary, AWAS Finance Luxembourg Sàrl (“AFLS”), under that Term Loan Credit
Agreement, June 2010, between AFLS, as the borrower, and various lenders.
The Company has guaranteed the obligations of its subsidiary, AWAS Finance Luxembourg 2012 Sàrl (“AFLS 2012”), under that Term
Loan Credit Agreement, July 2012, between AFLS 2012, as the borrower, and various lenders.
The Company has guaranteed the obligations of its subsidiary, AWAS Finance Luxembourg 2014 Sàrl (“AFLS 2014”), under that Term
Loan Credit Agreement, July 2012, between AFLS 2014, as the borrower, and various lenders.
115
26. Commitments and contingent liabilities (continued)
27. Risks and uncertainties (continued)
Company (continued)
Interest rate risk
Guarantees (continued)
Consolidated
The Company has guaranteed certain of the obligations of multiple subsidiaries, special purpose borrower entities under limited
recourse loan facilities for the acquisition financing of multiple aircraft in the AWAS fleet. Interest rate risk is the risk (variability in value) borne by an interest-bearing financial instrument, such as a loan or a bond, due to
variability of interest rates. The Group has entered into derivative contracts for some of its loan facilities which swap variable interest
rates for fixed; therefore any increase or decrease in interest rates on the loan will lead to a decrease or increase in the differential on
the swap. The Group’s floating rate loans partially offset the floating rate nature of some of our lease rental contracts, whereby an
increase in interest rates will be expected to be offset by higher rentals earned.
27. Risks and uncertainties
The Group’s directors have overall responsibility for the establishment and oversight of the Group’s risk management framework. The
Company’s Board of Directors has established the Audit Committee, which is responsible for developing and monitoring the Group’s
risk management policies. The committee reports regularly to the board of directors on its activities.
The Audit Committee advises the board of directors on the implementation of policies on risk and control and ensures that a suitable
system of internal control for the implementation of such policies is formulated, operated and monitored. In addition, the committee
reviews regularly the effectiveness of internal control and risk policies and seeks regular assurances from management that the system
is functioning effectively in managing risks in the manner which it has approved. The committee is assisted in its oversight role by the
Group’s Internal Audit. Internal Audit is responsible for regular reviews of risk management controls and procedures and it reports its
findings to the Audit Committee.
The effect on Group profit before tax of a 50 and 100 basis point change in interest rate, assuming all other variables are held constant,
would be as follows:
In thousands of USD
50 BPS
100 BPS
2014
8831,765
2013
6381,276
Asset risk
Whereas, a decrease of 50 and 100 basis points change in interest rates, would have had the equal but opposite effect, on the basis
that all other variables remain constant.
The Group bears the risk of re-leasing or selling the aircraft in its fleet at the end of their lease terms. If demand for aircraft decreases
market lease rates may fall, and should such conditions continue for an extended period, it could affect the market value of aircraft in
the fleet and may result in an impairment charge. The Directors have employed personnel with appropriate experience of the aviation
industry to manage the fleet and remarket or sell aircraft as required in order to reduce this risk.
The Group also has loans and borrowings that bear fixed interest rates determined at the inception of the agreement. A significant
change in interest rates could have a material adverse impact on the fair value of the Group’s loans and borrowings. However, the
company records these loans at the amortised cost and therefore the company’s future performance would not be impacted by any
future rate changes.
The Group is highly dependent upon the continuing financial strength of the commercial airline industry. A significant deterioration
in this sector could adversely affect the Group through a reduced demand for aircraft in the fleet and / or reduced market rates,
higher incidences of lessee default and an increase in aircraft on the ground. The Group periodically performs reviews of its carrying
values of aircraft and associated assets, trade receivables, notes receivables and the recoverable amount of deferred tax assets and the
sufficiency of accruals and provisions, substantially all of which are susceptible to the above risks and uncertainties.
Company
The effect on Company profit before tax of a 50 and 100 basis point change in interest rate, assuming all other variables would be held
constant, would be as follows:
Foreign exchange risk
In thousands of USD
The Group and Company have a minimum exposure to foreign exchange risk as the majority of transactions are denominated in
US dollars.
2014
1,1442,290
2013
1,1742,347
50 BPS
100 BPS
Whereas, a decrease of 50 and 100 basis points change in interest rates, would have had the equal but opposite effect, on the basis
that all other variables remain constant.
The Company also has loans and borrowings that bear fixed interest rates determined at the inception of the agreement. A significant
change in interest rates could have a material adverse impact on the fair value of these loans and borrowings. However, the Company
records these loans at the amortised cost and, therefore, the Company’s future performance would not be impacted by any future
rate changes.
116
117
Credit risk
Credit risk (continued)
Consolidated
The Group is subject to the credit risk of its lessees as to collection of rental payments under its operating leases. Credit risk is defined
as the unexpected loss in cash and earnings if the counterparty is unable to pay its obligations in due time. The effective monitoring
and controlling of airline customer credit risk is a competency of a dedicated Risk Management team.
Receivables represent rent, maintenance and other charges related to the lease of aircraft to lessees.
The maximum exposure to credit risk for trade receivables and finance lease receivable at the reporting date by
geographic region was:
Creditworthiness of each new customer is assessed and the Group seeks security deposits in the form of cash or letter of credits to
mitigate overall financial exposure to its lessees. The assessment process takes into account qualitative and quantitative information
about the customer such as business activities, senior management team, financial fitness, resources and performance, and business
risks, to the extent that this information is publicly available or otherwise disclosed to the Group.
In thousands of USD
2014
2013
2,883
7,235
13,558
The Group holds significant cash balances which are invested on a short term basis and are classified as cash and cash equivalents.
These deposits and other financial instruments give rise to credit risk on amounts due from counterparties. Credit risk is managed by
limiting the aggregate amount and duration of exposure to any one counterparty. The Group invests in counterparties with a rating
lower than A3 / P-1 (Moodys) on an exception basis only. The Group typically does not enter into deposits with a duration of more
than six months. In addition, the deposit amount placed by the Group with an individual institution typically does not exceed USD
75.0 million
Asia / Pacific
11,120
Europe
20,12421,372
Latin America
23,729
2,253
8,050
1,671
The value of trade receivables and other receivables is highly dependent upon the financial strength of the commercial aviation
industry as described in the asset risk section. Defaults by one or more of the Group’s major customers could have a material adverse
effect on our cash flow and earnings and our ability to meet our debt obligations.
Company
North America and Caribbean
Total
The Company holds significant cash balances which are invested on a short term basis and are classified as cash and cash equivalents.
These deposits and other financial instruments give rise to credit risk on amounts due from counterparties. Credit risk is managed by
limiting the aggregate amount and duration of exposure to any one counterparty. In addition, the Company invests in counterparties
with a rating lower than A3 / P-1 (Moodys) on an exception basis only. The Company typically does not enter into deposits with a
duration of more than six months. In addition, the deposit amount placed by the Group with an individual institution typically does
not exceed USD 75.0 million
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure before security. The maximum exposure to credit risk
at the reporting date was:
In thousands of USD
Note
20142013
65,90646,089
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure before security. The maximum exposure to credit risk
at the reporting date was:
17
229,856
242,879
Restricted cash
17
249,586
199,712
24
-
20,921
Other assets
13
20,258
9,447
In thousands of USD
210,786
223,559
365,597
368,689
Note
20142013
24
778
1,671
Loans to shareholder
25
5,739
5,283
Receivable from related parties
25
14
37,198
17,575
Loan to shareholder
25
5,739
5,283
29,644
25
1,332,501
1,069,182
39
23
15
Total
27,399
570,814527,132
Total
1,914,6621,666,736
Receivables represent interest income related to the cash on deposit.
118
119
Credit risk (continued)
Liquidity risk (continued)
Company (continued)
Receivables from related parties represent trading balances with entities within the Group. These are unsecured and have no fixed
term of repayments. No interest was charged on these receivables during year ended 30 November 2014.
In thousands of USD Carrying Contractual 12 months
1-2 years 2-3 years
Amount Cash Flows
or less
2013
Liquidity risk
Non-derivative financial liabilities
External borrowings
Consolidated
The Group has funded a significant part of its operations with debt financing. The ability of the Group to continue to operate
is dependent upon its ability to meet its payment obligations and adhere to covenant requirements under the respective loan
agreements, which are dependent, among other things, upon the factors outlined above.
Total
Interest rate swaps
Interest rate caps and swaps
Total
Carrying Contractual 12 months
Amount Cash Flows
or less
1-2 years
2-3 years
Total
(8,212,406) (1,767,790)
(1,449,003) (1,006,095) (1,093,787) (2,895,731)
60,404
(513,780)
-
-
-
-
(513,780)
360,708
(360,708)
(153,677)
(12,880)
(20,617)
(15,073)
(158,461)
(1,461,883) (1,026,712)
(1,108,860)
(3,567,972)
7,692,697
(9,086,894) (1,921,467)
Derivative financial assets / (liabilities)
Interest rate swaps
Interest rate caps and swaps
Total
120
(9,651)
(37,488)
(7,796)
(6,618)
(5,560)
(4,706)
(12,808)
778
-
-
-
-
-
-
(8,873)
(37,488)
(7,796)
(6,618)
(5,560)
(4,706)
(12,808)
(620,567) (2,416,179)
50,725
(513,780)
-
-
-
-
(513,780)
304,468
(304,468)
(124,116)
(12,839)
(12,521)
(19,815)
(135,177)
6,567,575
(7,798,603) (1,256,785)
(1,606,917) (1,229,383)
(640,382) (3,065,136)
(6,534)
(41,420)
(8,251)
(6,899)
(5,916)
(4,945)
(15,409)
1,671
-
-
-
-
-
-
(4,863)
(41,420)
(8,251)
(6,899)
(5,916)
(4,945)
(15,409)
It is not expected that the cash flows in the maturity analysis could occur significantly earlier, or at significantly different amounts.
Non-derivative financial liabilities
7,271,585
(1,594,078) (1,216,862)
3-4 years After 4 years
2014
External borrowings
(6,980,355) (1,132,669)
Derivative financial assets / (liabilities)
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of
netting agreements:
In thousands of USD 6,212,382
3-4 years After 4 years
As explained in note 21, the Group has principal repayments due under its existing loans from external parties which fall due during
the next 12 month period. These will be financed via operational cash flows (rental and disposal / acquisition of aircraft activities), new
debt financing and potentially new equity.
As at 30 November 2014, the Group had committed to purchase a total of 20 aircraft (on forward order and from airlines), scheduled
to deliver from 1 December 2014 through 2018. The Directors anticipate that a significant portion of the aggregate purchase price
for the aircraft will be funded by incurring additional debt. The exact amount of the indebtedness to be incurred will depend upon
the actual purchase price of the aircraft, which can vary due to a number of factors, including inflation, and the percentage of the
purchase price of the aircraft which will be financed.
If the Group cannot meet its obligations or if it breaches certain covenants under the various debt arrangements, it may be subject to
contract breach damages suits, it may be required to restrict or apply all cash flows from aircraft pledged as collateral for certain debt
facilities to meet principal and interest payments, and / or to paydown such debt facilities on an accelerated basis.
121

AWAS Annual Report 2014

Transcription

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