Air Canada Exits Government Support Amid Liquidity Boost

There is good news coming from Air Canada today as the airline announced that it would be withdrawing from further financial support made available by the government of Canada. This news comes several months after the government eased border restrictions and reopened the country to non-essential international travel.

While those entering Canada still need to deal with a PCR test, the country is still much more open than it was earlier in the year. Photo: Air Canada

$4 billion in unused credit

Due to its “improved liquidity position,” Air Canada has announced its withdrawal from further funding provided by the Canadian government. This support came in the form of an April 2021 support package that gave Air Canada interest-bearing loans of $5.375 billion through several separate credit facilities.

To date, Air Canada reports that it has only accessed the facility solely dedicated to refunding customers’ non-refundable tickets, while “all other remaining facilities totaling $3.975 billion have not been used,” the airline notes.

“Air Canada’s recovery from COVID-19 continues. We are recalling employees, adding new routes and frequencies to our network, and restoring services, and, last quarter, we completed a $7.1-billion financing.” -Michael Rousseau, President and Chief Executive Officer

All numbers listed above are in Canadian dollars. At the time of writing, $1CAD is equivalent to $0.79USD.

Air Canada 787-9
Demonstrating its strong recovery, Air Canada recently announced a new non-stop service between Montreal and Delhi which commenced on October 31st. Photo: Air Canada

Appreciative of the Canadian government’s support

The airline’s CEO noted that the company is deeply appreciative of the support offered by the government of Canada. This support “helped maintain a level playing field at a time when governments around the world, recognizing 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 adds that the government assistance helped to preserve thousands of jobs and served as “an extra level of insurance” that enabled the airline to raise additional liquidity on its own to manage the pandemic.

Another sign of recovery, Air Canada also recently declared that it was reversing the cancelation of some Airbus A220 orders while bringing forward 737 MAX deliveries. Photo: Vincenzo Pace | Simple Flying

Other airlines also emerging from government assistance

It’s not just Air Canada that is celebrating its independence from financial support offered by the government. In fact, just last week, German flag carrier Lufthansa fully repaid a €9 billion ($10 billion) loan under the German government’s Economic Stabilization Fund (ESF).

Even more impressive was the fact that this repayment was completed early. Similar to Air Canada, Lufthansa canceled all of its outstanding loan facilities with its respective government.

While Germany’s ESF will sell its stake in the airline, Air Canada notes that the government of Canada is still holding on to C$500 million worth of shares that it purchased in April. At the same time, however, half of the 14.6 million 10-year warrants to purchase Air Canada shares (at approximately $27.27 per share) have been canceled.

What do you think of this news coming from Air Canada? Are you encouraged by this recovery? Let us know by leaving a comment.