Notes to the Consolidated
In millions of U.S. dollars, unless otherwise stated
40. RESPONSIBILITIES AND COMMITMENTS
a) Aircraft trade-in options
The Company at times provides trade-in options to its customers in connection with a purchase agreement for new aircraft. These options provide a customer with the right to trade-in existing aircraft upon the purchase and acceptance of new aircraft. Currently, the Company has entered into a total of 18 trade-in aircraft options. The Company's obligation to receive the remaining three aircraft as trade-ins are directly tied to contractual obligations with customer and relate directly to the customer actually taking delivery of certain new aircraft. These options establish that the price of the asset given in payment may be put towards the purchase price of a new and more up-to-date aircraft model produced by the Company. The trade-in price is based on a percentage of the original purchase price of the aircraft. The Company continues to monitor all trade-in commitments in order to anticipate any adverse economic impact. Based on the current evaluation of the Company and based on third party independent appraisals, the Company believes that any aircraft accepted under trade-in may be sold or leased in the market without significant losses.
The subsidiary EAH is responsible for non cancelable operating leases of land and equipment. These leases expire at various dates to 2020.
The facilities of the subsidiary Embraer Aircraft Customer Services, Inc. – EACS are located on land leased under a contract that expires in 2020.
The Company has lease agreements for land, IT equipment and vehicles, with payments scheduled as follows:
c) Financial Guarantees
The following table provides quantitative data regarding the Company's financial guarantees provided to third parties. The maximum potential payments represent the worst-case scenario, and do not necessarily reflect the results expected by the Company. Estimated proceeds from performance guarantees and underlying assets represent the anticipated values of assets the Company could liquidate or receive from other parties to offset its payments under guarantees.
|Maximum financial guarantees
|Maximum residual value guarantees
|Mutually exclusive exposure (i)
|Provisions and liabilities recorded (Note 38)
|Off-balance sheet exposure
|Estimated proceeds from financial guarantees and underlying assets
(i) When an underlying asset is covered by mutually exclusive financial and residual value guarantees, the residual value guarantee may only be exercised if the financial guarantee has expired without having been exercised. On the other hand, if the financial guarantee is exercised, the residual value guarantee is automatically terminated. After a financial guarantee expires, there is an average three-month period in which a guaranteed party may exercise the residual value guarantee. This means that the exposure to mutually exclusive financial and residual value guarantees covering a single underlying asset cannot be cumulative. Therefore, the maximum exposure showed in this line item is not an aggregate amount of the combined value of mutually exclusive financial and residual value guarantees covering a single underlying asset.