Air Canada will soon be leaving a government-sponsored financial aid programme that was established to help it manage through the coronavirus-driven slump.
The Montreal-based carrier says on 19 November that its “improved liquidity position” will allow it to end the agreement that provided the airline with up to C$5.9 billion ($4.7 billion) in assistance in April.
“Air Canada’s recovery from Covid-19 continues,” says chief executive Michael Rousseau. “We are recalling employees, adding new routes and frequencies to our network and restoring services”. He also notes Air Canada has landed C$7.1 billion in new financing in the past quarter.
The bailout agreement, signed on 12 April, provided Air Canada with loans up to C$4 billion and gave the government a stake in the company to the tune of C$500 million. The company says it never drew any of the C$4 billion in credit.
In addition, the agreement provided C$1.4 billion to the company for the purpose of refunding tickets purchased by customers who were unable to travel due to flight cancellations or travel restrictions. Those restrictions, imposed in March 2020, began easing this year. Air Canada says that it accessed about C$1.2 billion of those funds.
“The money used for refunding the non-refundable tickets will be repaid as per the terms of the agreement with interest paid quarterly by Air Canada,” the airline says.
“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, recognising 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,” Rousseau says.
“In addition to helping preserve thousands of jobs and travel choice 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.”
The aid had been a long time coming. Shortly after the coronavirus tore around the world in early 2020, precipitating strict lockdowns and border closures, Canadian airlines began asking the government for sector-specific financial aid, pointing to such programmes in European nations and the USA.
Canada’s airlines had been forced to suspend most flight operations in 2020 due to these restrictions and the ensuing drop in passenger demand. The carriers also stopped flying to popular holiday destinations for several months in early 2021.
When financial support finally came, there were strings attached. The government required Air Canada to resume air service to smaller communities to which it had either suspended service or stopped operations completely last year.
Similar to conditions in the US relief bill, called the CARES Act, the Canadian programme provided loans to the company on the condition that Air Canada restrict dividends, share buybacks and executive compensation. The airline also was required to maintain employment levels.
This month, Air Canada executives said the carrier’s recovery is “most decisively underway”. During the third quarter, the company posted revenue of C$2.1 billion – almost three times the C$757 million revenue it reported in the third quarter of 2020.