Air Canada Strapped for Cash

[CLguy]

MONTREAL — Cash-strapped Air Canada (TSX:AC.A) has negotiated another loan to help it run operations, this time a US$195-million financing agreement with General Electric Capital Corp.

Under the financing, which amounts to about C$238 million, US$80 million was funded immediately, the Montreal-based airline said Wednesday.

"These agreements represent additional steps in the implementation of Air Canada's strategy of improving its short-term and longer-term liquidity through both traditional and non-traditional means," the company said in a statement.

Some conditions to further releases of funds under the loan do apply; the airline has agreed to sell to and lease back from GE Commercial Aviation Services - a division of GE Capital - a Boeing 777-300ER plane.

The 12-year agreement will provide Air Canada with at least US$40 million more financing, the company said.

Earlier in the week, Air Canada signed a deal for a five-year loan for US$78 million with Calyon New York Branch and Norddeutsche Landesbank Girozentrale. That loan, worth about C$95 million, will mature in December 2013.

Before that, the airline signed a deal to receive C$70 million from Groupe Aeroplan Inc. (TSX:AER) to help tide it over during its seasonally slow winter season.

Under that deal, Aeroplan will pay the airline when bookings are made and will resume a 45-day delay in payments next spring.

[Embraer190]

Now that AC is soon-to-be free from ACE, we'll see what's going to happen.

[North Shore]

didn't Air Canada (or ACE) just (within the last month or so) pay a huge dividend to shareholders? Surely, at that time, the need for this loan was evident?

[wallypilot]

didn't Air Canada (or ACE) just (within the last month or so) pay a huge dividend to shareholders? Surely, at that time, the need for this loan was evident?

no doubt about it....

and yes, aced dissolved itself and paid out it's $800 million as dividends to shareholders. I think many people thought that the cash would be absorbed into (equity issue) or loaned to AC, rather than paid as a dividend....but, the boss at ACE had to look out for his buddies.

[tonysoprano]

Here's hoping that Air CCAAnada can pull out of this one. Like they should do with Celin.

Just remember. I'll have more seniority than you. And when I find out it's you in the right seat, I'm going to eat you up and spit your bones out the side window. You really don't want to go there. For your sake, let's hope for the status quo.

[North Shore]

North Shore wrote:
didn't Air Canada (or ACE) just (within the last month or so) pay a huge dividend to shareholders? Surely, at that time, the need for this loan was evident?


no doubt about it....

and yes, aced dissolved itself and paid out it's $800 million as dividends to shareholders. I think many people thought that the cash would be absorbed into (equity issue) or loaned to AC, rather than paid as a dividend....but, the boss at ACE had to look out for his buddies.

Sheesh. Sell off assets to gain some temporary cash relief, at the expense of loan payments down the road; give away sorely-needed cash to shareholders, and then borrow it back from the banks; collect big job-performance bonus from Board of Directors.

Wish I was a CEO

[complexintentions]

hey, is that daveg working hard for his regular nomination for asshole-of-the-month? I think even his WestJet colleagues have given up on him...he's like their retarded relative who shits his pants at the family reunion....smile politely, and try not to stare....he can't help it...

[N2]

The solution is really quite simple. Change the initials from AC to GM then sit back and watch the cash flow!

But don't forget to fly in with the business jet when asking for the hand out, first impressions are everything!

[2R]

Whne the Captain of the Titanic ignored warnings about icebergs along the route ,he sealed the fate of his boat and passengers.
When AC1 spent 440 millions trying to price Canadain out of the market in the nineties it killed both companies.
When the historians look back at what happened to AC2 they will look at the asset stripping carpet baggers running it toward the icebergs at full steam .
The sad part is the unions will get the blame for the downfall in april when they walk the line in 09.
Perhaps the Government will rescue what is left and we will see a AC3 in 2010

[chu me]

First let me wish all of you a Merry Christmas Or Happy Holidays.

Then let me say that I think it is appropo that I chime in with a " cue government bailout of Air Canada in .....three........two.....one...." .

[North Shore]

Well, with your vast experience in high finance why don't you enlighten me?

The way I see it is that a couple of months ago, ACE had a huge pile of cash available - which it promptly gave away to shareholders. Now ACE's subsidiary is having to go to the bank to borrow a whole pile to

improve[ing] its short-term and longer-term liquidity through both traditional and non-traditional means,"

Surely, at that time, the writing was on the wall that there was going to be a liquidity problem with the airline?
Wouldn't it have been better to hold onto some of that cash and lend it to AC? At preferential interest rates, etc...
My cynical answer is "No" Why? Because if the high-ups in AC manage to meet their short-term performance goals, then they get their bonuses, and can ride off into the sunset wealthy men; leaving the employees and other shareholders holding the long-term bag...

I'm sure that you see it differently, however. Do tell.

[Old fella]

AC's biggest problems started with the acquision of CAI in 2000 which was the sum of Canadian Pacific, Eastern Provincial, Nordair and Pacific Western Airlines and later on CAI took WardAir. The aircraft types alone had to be a toxic mixture with everything from B737-200, DC-10, F-28, DHC-8, J-31 and the like.

In any other country aka USof A, an airline like CAI would have failed like Braniff, Pan Am, TWA(list goes on and on). But here in Canada , CAI being a western origination and based company, failure was not on because the Grits under Jean C. said it wasn't gonna to happen and it was to remain in Canadian hands aka Air Canada. American Airlines was involved in acquision talks as well I do believe but there was a question of 25% ownership as the max allowed.

If my Air Canada/TCA history is correct and I think it is, the old red maple leaf outfit was never involved in major mergers acquisitions from it's inception in the 1930's even when it was plugging around in the North Stars, Vicounts, Vanguards and the old Super Connies - actually I flew on every on of those as a youngster.

If AC fucks itself over, it is because of what they got themselves into in 2000.

Over and Out

[Johnny767]

Spoken like a guy - who does not have two clues of the facts!

[palebird]

Those are the facts put quite simply, sure one could go on and on as most AC's will but the reality is Canadian should have been let go to sink...oh well it is just the ongoing Canadian airline saga and I , for one, am so much happier since I left that rathole : )

[prop2jet]

If my Air Canada/TCA history is correct and I think it is, the old red maple leaf outfit was never involved in major mergers acquisitions from it's inception in the 1930's

I would say you are correct, however there never was any need for TCA/AC to acquire competitors to grow given that it was a crown corporation up until 1989. The only real issue prior to deregulation was that the routes were handed out. CP was the dominant airline in the Far East and AC was the dominant airline serving the U.S. and Europe. Both carriers of course had domestic coverage.

CCAA restructured AC to benefit a select group (Cerberus et al.) who provided the financing required for the emergence of the new AC. The catch of course was to sell off all the assets and return the profit back to the original financiers at a hefty return on their investment.

[CAL]

so any hiring in 09'?

[Embraer190]

so any hiring in 09'?

Not pilots or FAs.

[CAL]

...thats ok working on my greys...best of luck to the ac guys in 09'...

[Johnny767]

Those are the facts put quite simply....

Those are the facts? J31's...right! DC10's...gone prior to the merger. Facts spoken by the uninformed.

Air Canada blew a complete monopoly, on bad management. Toss in; 9-11, SARS, CCAA and a Mapleflot mentality of "that is how we have always done it," and you have the corporation in its present state of disrepair.

But, lets blame it all on the merger - that's an easy out.

[yycflyguy]

Achtung! Wit ze stock prices for AC.A shares at $1.50. Ze Germans shall take over ze wurld. Ok, just Air Canada today... but zuun ze Germans shall rule ze wurld!! At least after the formation of LuftCanada we can kybosh the Air Canada act, right??

[CLguy]

Johnny you are correct about the DC-10's being gone prior to the full merger but you are wrong that AC never operated them. Sure they never did have a red flag on the tail but when AC took over CAI, they created a numbered company that they operated and controlled CAI under for a period of time. So technically AC did operate the DC-10's but parked them before or just as the 2 companies were merging into one.

I also have to agree that the biggest mistake AC made way was agreeing to take over CAI and the biggest mistake CAI made was buying out Wardair. I don't think anyone has ever figured out what CAI actually got for all those millions.

Well we can thank the Liberals once again!

[Old fella]

Air Canada should have walked from that merger or cluster @#$! , rat @#$! or whatever you want to call it. They didn't and probably couldn't cause of political pressure, can you imagine any political party holding the reigns of government letting CAI fail. Remember the shit that hit the old Muldoon on the CF-18 contract............ Jean C. was watching.

Ya don't @#$! around with the west, their airlines, oil or whatever. Money and action was required and it was going to happen. Air Canada's fate was sealed - bar none!!

I stand by my commentry!!

[Old fella]

Those are the facts put quite simply....

Those are the facts? J31's...right! DC10's...gone prior to the merger. Facts spoken by the uninformed.

Air Canada blew a complete monopoly, on bad management. Toss in; 9-11, SARS, CCAA and a Mapleflot mentality of "that is how we have always done it," and you have the corporation in its present state of disrepair.

But, lets blame it all on the merger - that's an easy out.

Here is Air Canada's thoughts on my "facts spoken by ...........

[rd1331]

AC would be in worse shape without the merger with CAI. AC had basically no Far East routes, when they purchase CAI they got CAI's Far East routes. C3 was looking at getting the Far East routes from CAI, the only way for AC to stomp down C3 and get those routes was to merge with CAI. Without the Far East routes AC would not be in the place it is today. If C3 had gotten those routes from CAI it would be a much different story today, remember C3 still had money in the bank when they went "Bankrupt", more of a political move. Ever notice they went Bankrupt on the same day as AC was found guilty by the competition board, and C3 would have been awarded a very very hefty amount from AC.

[CLguy]

AC had basically no Far East routes

The only reason AC never had any Far East routes was because they didn't want them and make no mistake, if they wanted them they would have had them. When they were a Crown Corporation they chose the then lucatrive European routes and the government wouldn't let CP Air anywhere near Europe. Remember this was all before deregulation. The only overseas routes CP Air could get were the then less lucrative routes in the Pacific and only years later when it was obvious the paying routes of the future were in the west then AC wanted them. If CAI would have went bankrupt they still would have ended up with them anyway so the merger really wasn't needed to secure the Far East.

The merger happened because it would have been political suicide for the Chretien Liberals to deal such a blow to the west by letting CAI fail without government intervention.