Air Canada gets $4.7b as government takes stake

Bloomberg

Air Canada reached a deal with the Canadian government for loans and equity worth nearly C$5.9 billion ($4.7 billion), a package to help the airline get through the pandemic and restore flights to remote parts of the country.
The state, which sold off its ownership interest in the 1980s, will once again own a piece of Canada’s largest airline, buying C$500 million of shares at a discount. Prime Minister Justin Trudeau’s government also negotiated warrants as part of a broad financing agreement that makes Air Canada eligible for five new credit facilities totaling C$5.38 billion, according to a company statement.
In return for the money, Air Canada agreed to restrict share buybacks and dividends, keep employment at April 1 levels and follow through on a deal to buy 33 Airbus SE A220s made at a factory in Quebec. Executives won’t be allowed to earn more than C$1 million.
And the airline will resume service on routes its suspended to distant locations such as Gander, Newfoundland and Yellowknife, in the country’s far north.
The long-anticipated announcement will ease tensions between the industry and Trudeau’s government, which since last March has barred most foreign travellers from entering the country and recently made the rules even tougher.
Air Canada repeatedly complained that its home country was the only Group of Seven member without an aid plan specifically for the aviation sector — although the company has used federal wage subsidies available to all industries hit by the pandemic.
“We wanted a good deal, not just any deal. And getting a good deal can sometimes take a little time,” Finance Minister Chrystia Freeland said at a news conference.
Air Canada also committed to paying back customers who didn’t take flights they had booked because of Covid-19. One of the credit facilities, a C$1.4 billion line, is dedicated to financing refunds.
Air Canada will issue 21.6 million new shares. While the equity component is “somewhat surprising,” the package is “the money that’s needed,” said Robert Kokonis, managing director of Toronto-based aviation consulting firm AirTrav Inc.