MONTREAL — Air Canada says it is withdrawing from further financial support from the federal government, thanks to its improved liquidity position and ongoing recovery from the pandemic.
On April 12, 2021 Air Canada and the Canadian government announced their agreement on a $5.9 billion financial assistance package consisting of loans and credit for the airline amid the COVID-19 pandemic, including $1.4 billion earmarked for refunds for passengers out-of-pocket in the wake of COVID-19 cancellations.
Air Canada only tapped the funds dedicated to refunding customers’ non-refundable tickets.
President and CEO Michael Rousseau says Air Canada’s recovery from COVID-19 continues. “We are recalling employees, adding new routes and frequencies to our network, and restoring services, and, last quarter, we completed a $7.1-billion financing.”
Rousseau added: “We deeply appreciate the Government of Canada’s support as this helped maintain a level playing field at a time when governments around the world, recognizing the importance of air travel to their economies, were also assisting their national carriers in the face of the unprecedented downturn caused by COVID-19. In addition to helping preserve thousands of jobs and travel choice for Canadians, the assistance offered to Air Canada importantly served as an extra level of insurance that enabled us to raise additional liquidity on our own to manage the pandemic and give us sufficient resources to effectively compete in the post-pandemic marketplace.”
To date Air Canada has accessed about $1.2 billion of the provisions, with the money going directly to customers. Some 58% of eligible Air Canada customers requested refunds, including those not covered by the government provisions. The money used for refunding the non-refundable tickets will be repaid as per the terms of the agreement with interest paid quarterly by Air Canada.
Also part of the April 2021 agreement, the government purchased $500 million worth of Air Canada common shares, representing about 6% of the current public float. Air Canada also issued to the government about 14.6 million 10-year warrants for the purchase of an equal number of Air Canada shares. With the termination of the operating credit facilities, half of these warrants, which have not yet vested with the government, have been cancelled immediately, says Air Canada. And subject to TSX approval, Air Canada intends to call the balance of the vested warrants for cancellation as per their terms at fair market value.
Rousseau says that in Q3 2021 Air Canada completed a series of financing transactions generating gross proceeds of about $7.1 billion. These financing transactions provided substantial liquidity to Air Canada and extended debt maturities out until near the end of the decade. As of September 30, 2021, Air Canada’s unrestricted liquidity was approximately $14.4 billion.