Air Canada reaches deal on $5.9B aid package with Ottawa

The federal finance ministry said it was still in negotiations with other airlines about possible aid. Calgary-based WestJet confirmed discussions with Ottawa remained ongoing

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OTTAWA/MONTREAL — Air Canada, struggling with a collapse in traffic due to the COVID-19 pandemic, reached a deal on Monday on a long-awaited aid package with Ottawa that would allow it to access up to $5.9 billion, both sides said.

As part of the package, Air Canada said it would proceed with planned purchases of 33 Airbus SE 220 airliners and 40 Boeing Co 737 MAX airliners.

“This financial support… will help Air Canada weather the current economic downturn and will protect thousands of Canadian jobs,” the federal finance ministry said in a statement.

Canada’s largest carrier, which last year cut over half its workforce, or 20,000 jobs, and other regional airlines have been negotiating with the Liberal government for many months on a coronavirus aid package.

The federal finance ministry said it was still in negotiations with other airlines about possible aid. Calgary-based WestJet confirmed discussions with Ottawa remained ongoing.

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The Air Canada package consists of a series of debt and equity financing agreements with the Canadian government, the airline said in a statement. Under the terms of the deal, the government will be able to buy $500 million worth of shares in the airline, a roughly six per cent stake.

Michael Rousseau, the airline’s president and chief executive officer, said the liquidity “provides a significant layer of insurance for Air Canada.”

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As part of the deal, Air Canada said it would agree to unspecified restrictions on the issuance of dividends and share buy-backs. Executive compensation will be capped and current employment levels will not fall below the 14,859 people now working for the airline.

Air Canada can borrow $1.5 billion in the form of a secured revolving credit facility at a 1.5 per cent premium to the Canadian Dollar Offered Rate and a further $2.475 billion in the form of three unsecured non-revolving credit facilities of $825 million each, it said.

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Rousseau said the aid package would help the carrier “better resolve customer refunds of non-refundable tickets, maintain our workforce and re-enter regional markets.”

Air Canada and rival WestJet had pleaded for help for months as demand plummeted. Ottawa resisted, demanding the airlines restore some of the regional routes they had cut and promise to refund passengers who could not take flights they had booked.

In an emailed statement, WestJet said it would provide updates on its discussions with the federal government “at the appropriate time.”

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“The WestJet Group of Companies continues discussions with the Government of Canada on a safe travel-restart framework. We remain focused on a long-term solution that will serve the best interests of Canadians,” it stated.

“A healthy WestJet will help lead a stronger recovery, increasing competition and consumer choice while lowering the cost of travel for Canadians, all while anchoring Canada’s vital air travel and tourism sectors.”

The airline said it remained committed “to building back even stronger for the betterment of all Canadians.”

“Since October 2020, WestJet’s refund policy has been industry-leading in Canada, and consistent with the U.S., U.K. and E.U.,” it said in a statement.

“The WestJet Group continues to operate self-sufficiently with the exception of the Canada Emergency Wage Subsidy (CEWS), which flows through directly to our employees. We have already communicated we will restore service to all 42 airports that we served pre-COVID and did so at our earliest opportunity.”

— With files from Sammy Hudes

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