YYC009

Airlines are a place of seniority and although the jobs will one day come back, there are those that will not return as they will not want to start at 0 all over again.

mileageking

Quote:

Equity stakes have been ruled out, so the rescue package is expected to be a mix of low-cost loans and wage subsidies, and to come with restrictions related to executive compensation. Two of the sources said the package would ensure key regional routes would be maintained and that current orders for aircraft would not be cancelled if it were to affect jobs in Canada. It remains unclear if equipment purchases remain part of the package.

One source said the government will announce a fund for airlines to draw from to refund customers for flights cancelled because of the pandemic. Air Canada has $2.3-billion in prepaid fares, including cancelled flights, according to company documents..

Ottawa to announce multibillion-dollar relief package for Air Canada, sources say - The Globe and Mail

TheCanuckian

So now the government will use money I've given them through taxes to reimburse me for the money Air Canada took from me through cancellations. Cool.

24left

Love this post.

****

In related news...

QUOTE:

"In early March, Unifor President Jerry Dias told CTV News Channel’s Power Play that the airline aid package is expected to surpass an original target of $7 billion."It originally was $7 billion for the entire industry over 10 years at one per cent interest, that was quite a while ago. Of course now we’re dealing with regional issues and we’re dealing with of course the repayment of the customers, so I would expect now that the $7 billion is the floor, not the ceiling," he said at the time."


CTV News - Monday, April 12, 2021 6:08PM EDT

Ottawa to unveil COVID-19 aid package for Air Canada: sources

https://www.ctvnews.ca/politics/otta...rces-1.5384479


Announcement at 7pm after the markets close. Evan explains more in his video


EDIT TO ADD:

CBC quote:

"The government also has a plan to create a pool of funds that will allow passengers who saw flights cancelled with other airlines last year to receive refunds as well, the sources said."

https://www.cbc.ca/news/politics/air...lief-1.5984543
.

Aselwyn

Full terms of the deal now are out https://aircanada.mediaroom.com/2021...uidity-Program

Bohemian1

I'm sure that AC will confirm the details later, but I'm guessing it will take the usual 6-8 weeks to get a refund.

The Lev

Seems like the government drove a pretty hard bargain.

Hopefully AC got some sort of commitment to open up the borders, otherwise not sure it would be worthwhile.

mileageking

Yes but as a $1.4b loan which AC has to pay back over 7 years at 1.211% annual interest rate. AC would ultimately pay for the refund.

tcook052

The details in case there's ever a problem pulling up the link:

MONTREAL, April 12, 2021 /CNW/ - Air Canada announced today that it has entered into a series of debt and equity financing agreements with the Government of Canada, which will allow Air Canada to access up to $5.879 billion in liquidity through the Large Employer Emergency Financing Facility (LEEFF) program.

"Air Canada entered the pandemic more than a year ago with one of the global airline industry's strongest balance sheets relative to its size. We have since raised an additional $6.8 billion in liquidity from our own resources to sustain us through the pandemic, as air traffic ground to a virtual halt in Canada and internationally," said Michael Rousseau, President and Chief Executive Officer of Air Canada.

"The additional liquidity program we are announcing today achieves several aligned objectives as it provides a significant layer of insurance for Air Canada, it enables us to better resolve customer refunds of non-refundable tickets, maintain our workforce and re-enter regional markets. Most importantly, this program provides additional liquidity, if required, to rebuild our business to the benefit of all stakeholders and to remain a significant contributor to the Canadian economy through its recovery and for the long term.

"As vaccine deployments ramp up, we continue to work with the Government of Canada on the evolution of safe and science-based test and quarantine relief measures with a view to safely restarting our sector. We know that Canadians are looking forward to re-connecting with friends and family and taking those long-awaited vacations and business trips and we will be ready to safely connect Canadians within Canada and Canada to the world," said Mr. Rousseau.

The financial package provides for fully repayable loans that Air Canada would only draw down as required, as well as an equity investment, and is comprised of:

• Gross proceeds of $500 million for Air Canada shares at a price of $23.1793 per share;
• $1.5 billion in the form of a secured revolving credit facility at a 1.5% premium to the Canadian Dollar Offered Rate (CDOR); the facility is secured on a first lien basis by the assets of Aeroplan Inc., Air Canada's shares in Aeroplan as well as certain assets of Air Canada, including certain intellectual property relating to the Aeroplan loyalty program;
• $2.475 billion in the form of three unsecured non-revolving credit facilities of $825 million each with: the first, five-year tranche at a 1.75% premium to CDOR per annum; the second, six-year tranche at 6.5% per annum (increasing to 7.5% after 5 years); and the third, seven-year tranche at 8.5% per annum (increasing to 9.5% after 5 years);
• As part of the financial package, Air Canada issued an aggregate of 14,576,564 warrants exercisable for the purchase of an equal number of Air Canada shares, subject to customary adjustments, at a price of $27.2698 per share during a 10-year term, representing 10% of the total commitment available under the above secured and unsecured credit facilities; 50% of the warrants vested concurrently with the implementation of the credit facilities and the remaining 50% of the warrants will vest on a proportional basis to the amounts that Air Canada may draw under the above unsecured credit facilities;
• Up to approximately $1.4 billion in the form of an unsecured credit facility tranche to support customer refunds of non-refundable tickets. The facility will have a seven-year term and carry an annual interest rate of 1.211%.

As part of the financial package, Air Canada has agreed to a number of commitments related to customer refunds, service to regional communities, restrictions on the use of the funds provided, employment and capital expenditures. These include:

• Beginning April 13, 2021, offering eligible customers who purchased non-refundable fares but did not travel due to COVID-19 since February 2020, the option of a refund to the original form of payment. In support of its travel agency partners, Air Canada will not retract agency sales commissions on refunded fares;
• The resumption of service or access to Air Canada's network for nearly all regional communities where service was suspended because of COVID-19's impact on travel, through direct services or new interline agreements with third party regional carriers;
• Restricting certain expenditures, and restricting dividends, share buybacks and senior executive compensation;
• Obligations to maintain employment at levels which are no lower than those at April 1, 2021; and
• The completion of the airline's acquisition of 33 Airbus A220 aircraft, manufactured at Airbus' Mirabel, Quebec facility. Air Canada has also agreed to complete its existing firm order of 40 Boeing 737 Max aircraft. Completion of these orders remains subject to the terms and conditions of the applicable purchase agreements.

In connection with the Government's equity investment, Air Canada has agreed to provide customary registration rights. The Air Canada shares and warrants issued to the Government are subject to certain transfer restrictions as well as an exercise cap which limits the Government's aggregate voting rights from the shares acquired pursuant to this investment (including upon any exercise of the warrants) to 19.99%.

seawolf

Why did it take so long to get to this? I'm not familiar with Canadian politics.

Adam Smith

AC entered the pandemic as possibly the best capitalized airline in the world. They simply didn't need the money as much as many other airlines did, and were able to obtain financing in the private sector on terms they felt were better than what the government was offering.

The government not forcing AC (or any other airline) to provide refunds also allowed them to use customer funds as interest-free financing. The government had the ability to force AC to provide refunds if it wanted, it just didn't value consumers enough to do so.

mileageking

1. Refunds for tickets purchased:
a. on or before Mar 22 '20 for travel after Feb 1st '20, for flights either cancelled by the passenger or AC.
b. after Mar 22 '20 where AC cancelled the flight.

2. Executive total compensation capped at $1m. Payment of dividends and share buybacks not allowed. Restriction will last for as long as the loan lasts.

Video of interview with Deputy PM and Minister of Transport (scroll to 34.50)

AC7E7

Government ownership again - god help us.
Considering most Canadians will have access to a vaccine in the next 3 months, I wonder why AC agreed to such terms. At this point, maybe AC should have just gone at it without aid. I will have to study the agreement in more detail.

Watching the news conference, CBC reporters asked how many questions re executive compensation? How much does the head of the CBC make? Activist reporters need to calm down. Executive compensation limits were always going to be part of an agreement. It wasn’t a hill AC execs were going to die on, and really wasn’t a ‘big’ win for Canadians despite how the gov’t will frame it for political reasons.

One point that bugs me throughout this pandemic - governments kept telling people not to travel. People generally listened. Planes were empty. WestJet and AC closed these routes. We are in the middle of another shutdown in most of the country and telling people to stay home. Now the government is mandating AC to serve these communities?

Welcome back, Mapleflot.

Adam Smith

The government's voting rights will be capped at less than 20%.

They evidently felt that either they needed the liquidity - because it will take quite some time for travel to return to levels where they can be profitable and/or for optics, or they'll use this financing to pay down more expensive financing they obtained from the private sector.

Many of these communities had little to no air service outside of AC. Mandating AC to return to those routes likely isn't going to lead to a lot of additional travellers in aggregate, but may be meaningful to people in those communities.

AC7E7

20% is a big nut. Shares are going to tank tomorrow.