canadiancow

Wait, so they're considering selling Aeroplan again?

mileageking

Except this time at CDN 1/2c / mile

Adam Smith

According to the presentation that AC used to raise the $1.6 billion in financing last month, in March, they were burning through about $22MM a day, with burn being "calculated based on the total change in cash, and short and long term investments, which mainly includes cash flows from operating activities, capital expenditures and ongoing and scheduled debt repayments, but excluding a lump-sum debt maturity of C$255 million". But "net cash burn" is a non-GAAP measure (i.e. not a standardized calculation), so we don't know exactly what he meant.

With the schedule cut back so drastically, not providing refunds, CEWS, etc, it would be surprising if the net cash burn were still $20MM a day in the 2nd quarter, but $20MM of the entire quarter sounds way too low. It's possible that the "burn" he was referring to was a different "burn" from what was talked about previously. Or maybe the burn was really still $20MM a day.

(I can't find a reference to where Rousseau actually said $20MM last month, so it's possible the journalist was also misinterpreting the March $22MM a day figure)

I think you were joking, but just for anyone who doesn't know about what UA did, they didn't sell MileagePlus or even a stake in it. They just pledged it as collateral for a loan, like you might pledge your house as collateral for a mortgage. They still own it, but now if UA goes under, those lenders will have a priority claim on MileagePlus.

AC could, in theory, do the same with Aeroplan.

canadiancow

Yes, I was joking. But I would find it amusing if AC was willing to put it up as collateral so soon after acquiring it back. Not that I expect them to go bankrupt, so it wouldn't matter.

Just amusing.

Adam Smith

An asset is an asset. When you're scrounging for cash, you tend not to get too fussed about where you get it from

tcook052

https://www.newswire.ca/news-release...856479812.html

MONTREAL, June 22, 2020 /CNW Telbec/ - Air Canada today announced that it recently closed two additional financing transactions for net proceeds of $1.23 billion. Since the start of the COVID-19 pandemic in the first quarter of 2020, Air Canada has raised $5.5 billion of liquidity.

On June 22, 2020, Air Canada completed a private offering of $840 million aggregate principal amount of 9.00% Second Lien Secured Notes due 2024 (the "2024 Notes"), which were sold at 98% of par. The 2024 Notes are secured obligations of Air Canada, secured on a second lien basis by certain real estate interests, ground service equipment, certain airport slots and gate leaseholds, and certain routes and the airport slots and gate leaseholds utilized in connection with those routes.

Earlier in June, Air Canada completed a private offering of one tranche of Class C EETCs with a combined aggregate face amount of approximately US$315 million, which were sold at 95.002% of par. The Class C tranche ranks junior to the previously issued Series 2015-1, Series 2015-2, and Series 2017-1 EETCs, and is secured by liens on the 27 aircraft financed under the Series 2015-1, Series 2015-2, and Series 2017-1 EETCs. The Class C EETCs have an interest rate of 10.500% per annum, and a final expected distribution date of July 15, 2026.

"The fact Air Canada was able to add $1.23 billion to its liquidity with these last two transactions without utilizing any of its previously disclosed unencumbered assets leaves the airline in an excellent position to access additional funds should the need arise. Complementing these efforts have been ongoing initiatives to reduce cash burn through such measures as workforce reductions, a $1.1 billion Cost Transformation Program and capacity and network rationalization," said Pierre Houle, Managing Director and Treasurer of Air Canada.

In addition to these more recent financings, Air Canada also concluded the following financing transactions in 2020:

• In March 2020, Air Canada drew down its US$600 million and $200 million revolving credit facilities for aggregate proceeds of $1.03 billion.
• In April 2020, Air Canada concluded a 364-day term loan in the amount of US$600 million, secured by aircraft and spare engines, for proceeds of $829 million.
• In late April 2020, Air Canada concluded a bridge financing of $788 million for 18 Airbus A220 aircraft which Air Canada expects to replace with longer-term secured financing arrangements later in 2020.
• In June 2020, Air Canada concluded an underwritten marketed public offering of 35,420,000 Class A Variable Voting Shares and/or Class B Voting Shares of the Company at a price to the public of $16.25 per share, for aggregate proceeds of $575.6 million, and a concurrent marketed private placement of convertible senior unsecured notes due 2025 for aggregate proceeds of US$747.5 million ($1.01 billion).

"We entered 2020 on the doorstep of investment grade with a very strong balance sheet, low net leverage and significant liquidity, before the COVID-19 pandemic and government-imposed quarantines and border restrictions destroyed demand and depleted cash. Air Canada's strong relative position has allowed us to navigate through this crisis and we have full confidence that we will be successful in maintaining liquidity at levels more than sufficient to meet the challenges and take advantage of the opportunities ahead. With these latest transactions Air Canada has now raised approximately $5.5 billion in 2020 and expects to end the second quarter of 2020 with at least $9 billion in liquidity," concluded Mr. Houle.

Air Canada is utilizing the net proceeds from these transactions to supplement its working capital and for other general corporate purposes. The net proceeds from the financings will serve to increase Air Canada's cash position, thereby allowing for additional flexibility both from an operational standpoint and in the implementation of its planned mitigation and recovery measures in response to the COVID-19 pandemic.

Air Canada's unencumbered asset pool (excluding the value of Aeroplan and Air Canada Vacations) amounts to approximately $2.5 billion at current exchange rates. Air Canada will continue to explore financing arrangements should additional liquidity be required or to refinance existing debt to push out maturities.

Adam Smith

Without more details, hard to be precise, but because these notes were sold at a discount, the true cost to AC is higher than the quoted interest rate. The second lien notes are probably about 9.5% and the EETCs are about 12.4%.

Expensive money, but interesting that AC has borrowed against assets that it has already borrowed against once, preserving flexibility on other assets.

Stranger

Also here, with slightly different wording and different details:

https://www.flightglobal.com/strateg...138948.article

tracon

The refund thread would be a lot shorter if we were being paid 9%.

tcook052

https://business.financialpost.com/t...anada-ceo-says

Airlines need aid or ability to fly to escape ‘catastrophic territory,’ Air Canada CEO

The chief executive of Canada’s largest air carrier says it’s time for the federal government to either relax pandemic-related restrictions on travel or provide more aid to a beleaguered airline industry that has been left “basically … in shutdown mode” due to measures put in place to limit the spread of COVID-19.

mileageking

https://www.flightglobal.com/strateg...140733.article

blue2002

Brilliant. While we are at it let's nationalize all restaurants and hotels affected by the current situation...

tcook052

Cash-strapped airlines call for clarity from Ottawa on when vaccinated Canadians can travel again

Air Canada representative David Rheault, meanwhile, said his company is losing $15 million per day as pandemic restrictions persist.

24left

Just posted a short while ago at the Globe & Mail. (Not sure if paywall). Wonder who the unnamed sources were.....

February 15 2021

Airlines COVID-19 rescue negotiations at critical stage, sources say

QUOTES:

"The federal government and Canada’s airlines are at a critical stage in backroom negotiations that could soon end months of haggling and result in a multibillion-dollar rescue plan for the pandemic-hobbled industry."

.....
"Any government rescue package would require the airlines to refund customers for flights cancelled because of the pandemic, an amount estimated to be in the billions of dollars, the government source said.

Ottawa is also demanding that no bailout money go to executive bonuses; that key regional routes be maintained; and that airlines not cancel orders for aircraft that would affect jobs in Canada. It remains unclear if equipment purchases remain part of the talks, according to the government source.

The government has taken off the table its demand for board seats, but it remains open to some form of equity ownership in return for low-interest loans to the industry, the government and two industry sources said."


https://www.theglobeandmail.com/poli...e-sources-say/

EdmFlyBoi

Would be nice to see the A220 order back to 45 frames - it is such a nice ride. One would think that the move to having A330 and A32X maintenance done in Quebec is part of this push.

Curious as to how they will resolve nonrefundable cancellation fees and those who converted cancelled tickets to Aeroplan miles. I have dragged my feet on dealing with one booking thinking that there might be an option to have it refunded if this deal goes through.