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Tuesday, March 21, 2023

Air Canada exits Government of Canada financial support as industry recovery continues

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Air Canada has announced that it will no longer receive financial assistance from the Government of Canada due to its improved liquidity situation and continuous recovery from the epidemic.

The support package, which was announced in April 2021, gave the carrier access to $5.375 billion in interest-bearing loans through six different credit facilities.

To date, Air Canada has only utilized the facility dedicated to refunding customers’ non-refundable tickets, with the remaining $3.975 billion facilities remaining untapped.

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. Today, in another convincing sign of our progress, we are announcing our withdrawal from the major funding provisions of our support agreement with the Government of Canada for the $3.975 billion in facilities that were never accessed and remain unused,” said Michael Rousseau, President and Chief Executive Officer.

“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 choices 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.”


Air Canada’s support agreement with the government offered access to up to $5.375 billion in interest-bearing loans and $500 million in equity for a total of $5.875 billion in liquidity under the Large Employer Emergency Financing Facility. It was made up of various components, including:

Three distinct $825 million unsecured revolving credit arrangements plus a $1.5 billion secured revolving credit facility. None of the $3.975 billion available under these facilities was ever used, and Air Canada was free to discontinue them at any moment without penalty under the terms of its agreement with the government, which it did.

A $1.4 billion unsecured facility dedicated entirely to refunding non-refundable tickets to customers. Approximately 58% of eligible passengers requested refunds, including those who were not protected by the government program, with the remaining consumers opting to keep their future ticket credits with the airline.

Air Canada has accessed around $1.2 billion of the facility to date, with the funds going directly to customers. The money used to refund non-refundable tickets will be reimbursed according to the terms of the arrangement, with Air Canada paying quarterly interest.

The government bought $500 million worth of Air Canada common stock at $23.18 a share, accounting for about 6% of the existing public float, which it still owns.

Air Canada also offered 14.6 million 10-year warrants to the government for the purchase of an equivalent number of Air Canada shares at a price of $27.27 per share.

Half of these warrants, which had not yet vested in the government, were canceled immediately as a result of the termination of the operating credit facilities. Air Canada proposes to call the rest of the vested warrants for cancellation at fair market value, subject to TSX approval.

Air Canada concluded a series of financial deals in the third quarter of 2021, totaling approximately $7.1 billion in gross cash. These financing agreements supplied Air Canada with significant liquidity and prolonged the maturity of its debt to the end of the decade.

Air Canada reported that its unrestricted liquidity was approximately $14.4 billion as of September 30, 2021, and consisted of roughly $9.5 billion in cash and cash equivalents, short-term and long-term investments, and about $4.9 billion in available undrawn credit facilities, including the $3.975 billion in unused government facilities being canceled with today’s announcement.

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