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Air Canada to get billions in COVID aid in exchange for restoring domestic routes, refunding cancelled trips

Air Canada, which last year cut over half its workforce, and other regional airlines have been negotiating with the Liberal government for many months on an aid package

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Air Canada will receive a multibillion-dollar relief package from the federal government and in exchange the airline will restore domestic routes and refund customers whose flights were cancelled because of the COVID-19 pandemic.

Months after beleaguered airlines launched negotiations over a bailout, Air Canada announced on Monday evening that it reached an agreement with the federal government that will allow it to access up to $5.9 billion through the Large Employer Emergency Financing Facility (LEEFF) program.

“This is a good and fair deal for Canadians,” Finance Minister Chrystia Freeland said in announcing the deal.

The country’s airline sector has been treading water since last March. Canada’s two largest airlines, Air Canada and WestJet, have laid off thousands of staff and cancelled several flight routs. Porter, Sunwing and Air Transat laid off most employees and suspended service.

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The package includes a series of debt and equity financing agreements with the federal government.

As part of the package, Air Canada committed to customer refunds, servicing routes to regional communities, maintaining jobs and completing previous orders of aircraft.

Under the terms of the deal, the government will buy $500 million worth of shares in the airline.

  1. Air Transat aircraft sit on the tarmac at Pearson International Airport, April 8, 2020.

    Federal government approves Air Canada’s $190M purchase of Transat, with conditions

  2. Air Canada said on Wednesday it will cut its first-quarter capacity by an additional 25 per cent, resulting in a workforce reduction of about 1,700 employees.

    Air Canada to cut 1,700 employees as COVID-19 restrictions, lockdowns bite

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.

“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,” president and chief executive officer of Air Canada Michael Rousseau said in a press release.

Air Canada, 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.

As part of the deal, Air Canada says it will complete existing orders for 33 Airbus A220 and 40 Boeing B-737 Max airliners.

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It will maintain employment at levels that are no lower than those at April 1, 2021. The union says this is 15,000 people.

It will restrict certain expenditures, dividends, share buybacks and senior executive compensation.

It will resume service or access to its network for nearly all regional communities where service was suspended due to COVID-19.

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.

— With additional reporting by Reuters

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