Air Canada Gets Billions in Loans, Equity in Government Aid Deal

© Bloomberg Workers remove luggage from an Air Canada plane on the tarmac at Montreal-Pierre Elliott Trudeau International Airport (YUL) in Montreal, Quebec, Canada, on Sunday, Jan. 31, 2021. Canada’s largest airlines have agreed to suspend flights to the Caribbean and Mexico for three months while international travelers will also be tested on arrival, and will be forced to quarantine at designated hotels to await results.

(Bloomberg) — Air Canada said it reached a deal with the Canadian government for loans and equity worth nearly C$5.9 billion ($4.7 billion), part of a package that will see the airline restore many routes it canceled because of the pandemic.

CONSTELLATION BRANDS, INC.

The airline will sell C$500 million worth of shares and issue millions of warrants to the government and become eligible for five new credit facilities worth about C$5.38 billion, the airline said in a statement late Monday. The government’s voting rights in the company will be capped at just below 20%.

In return, Air Canada agreed to restrict share buybacks and executive pay, keep employment at April 1 levels and follow through on a deal to buy 33 Airbus A220s made at a factory in Quebec. It’s also committed to giving refunds to customers whose flights were canceled because of Covid-19.

The credit facilities are “fully repayable loans that Air Canada would only draw down as required,” the Montreal-based company said.

Canada’s government had been slow to join other major economies in providing financial help to an industry battered by Covid-19 and foreign travel restrictions that have only been getting tougher.

Air Canada had repeatedly complained that its home country was the only Group of Seven member without an aid plan specifically for the sector — although the company has taken advantage of federal wage subsidies available to all industries hit by the pandemic.

A number of media outlets including Canadian Broadcasting Corp. and The Globe and Mail reported earlier than an aviation financial aid package was coming.

As of March 18, government financing for the airline industry globally, including loans and equity stakes in exchange for cash, has totaled more than $183 billion, according to Ishka, an aviation finance and investment consultancy.

Before today, Canada’s most visible lifeline to the industry was a combined C$375 million ($298 million) in emergency loans to Sunwing Airlines Inc. and Sunwing Vacations Inc.

“Protecting Canadian customers is important. And maintaining a competitive Canadian air sector, Canadian airlines, and the thousands of good jobs in this sector is a priority,” Finance Minister Chrystia Freeland said in a statement.

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