Air Canada gets $1B in backing

[Donald]

http://www.cbc.ca/money/story/2009/07/2 ... anada.html

Air Canada gets $1B in backing

Air Canada will have 'breathing room' after raising $1 billion, president and CEO Calin Rovinescu said. The federal government, one of its agencies and companies linked to Air Canada are among the lenders supporting the airline with up to $1 billion in credit, the parties announced Wednesday.

The loans complete the third leg of a restructuring program the airline undertook to survive through the recession.

However, the money won't come cheap; up to $700 million of it will have a minimum of 12.75 per cent interest.

"The $1 billion of new liquidity will give us breathing room towards achieving sustainable profitability" amid massive losses in the airline business, said Calin Rovinescu, president and CEO.

The money was part of a turnaround plan that included raising $600 million, extracting concessions from the airline's unions and convincing the federal government to allow the company to delay pension payments.

"With these financings and other transactions, the pension funding moratorium and new pension deficit funding arrangements, as well as the 21-month extensions to our collective agreements on a cost-neutral basis, we have strengthened our position," Rovinescu said.

Among a whole series of initiatives announced Wednesday, Air Canada said it has:

Arranged a credit agreement giving it up to $700 million, with $600 million available initially. "Amounts drawn under the credit agreement bear interest at a minimum annual rate of 12.75 per cent."
Reached a deal with a supplier giving the airline about $220 million "in consideration of various contractual commitments."
Arranged a sale-leaseback for three Boeing 777-300ER planes, giving it $122 million.
Extended the repayment date of an $82 million loan to December 2013 from December 2009.
Repaid $117 million under various credit agreements.
Export Development Canada, a federal agency, has provided $150 million under the credit agreement, and the federal government is lending $100 million through its Canada Account.

Access to new financing will keep Air Canada flying through the recession, the airline hopes. (AdrianWyld/Canadian Press)ACE Aviation Holdings Inc., Air Canada's parent company, is lending $150 million.

Aeroplan, the loyalty points business spun out of Air Canada, is providing $150 million.

GE Canada Finance Holding Co. was also named as a member of the lending group.

Air Canada said that under the credit agreement, the airline will give lenders warrants to buy up to five per cent of Air Canada shares.

ACE had said last year that it planned to undergo a liquidation, but market conditions and opposition by certain shareholders led it to initially postpone a shareholder vote on the plan.

"Given ACE's participation in Air Canada's credit facility, it is unlikely that ACE will pursue a liquidation in the near term," the company said.

[wallypilot]

At 12.75%, that's an incredible amount of interest...10.625 million in the first month!

[CAL]

my company borrows that each year and we only have four airplanes..trust me...as bad as you think your situation is...someone else is worse...

[iflyforpie]

Say goodbye to that money. Never going to see it again.

It's just like those Pay Day loan companies, except on a bigger scale. The people who resort to borrowing from them are the ones who can least afford the 60%/annum interest they wind up charging on outstanding amounts.

The only difference is, Air Canada can default and continue operating on Government gratuities while the poor sod who defaults on a thousand dollar loan is ruined and unable to get any credit for the next seven years.

Air Canada is in trouble. Their liabilities are part of that trouble. Increasing their liabilities, principle and servicing, is the wrong thing to do. They might as well be rearranging deck chairs on the Titanic.

Let it fail, and let some venture capitalists pick up the pieces for pennies on the dollar and make a profitable company again.

[Flybaby]

Does any one else smell multimillion dollar bonuses for management before they file for bankruptcy again?

[Panama Jack]

Air Canada can default and continue operating on Government gratuities

What Government gratuities? The privatized Air Canada has been f**cked more by the Federal Government than molly-coddled, thanks to descrimitatory legislation affecting Air Canada and a cash-cow mentality towards civil aviation in Ottawa.

To rewrite your closing statement, let the Federal Government keep their paws off business and make a profitable company again.

[Sasquash]

Rovinescu ? wasn't he the CEO of GM before Obama sacked him????

[Hedley]

Did Bobby Milton kick in anything from any of his
multiple $10M bonuses? You know, just for old
time's sake?

P.S. Anyone who believes that Air Canada isn't
still part of the Federal government, probably believes
that NavCan isn't either

The gov't isn't about to let anything bad happen to
either of them. However, there is a price for that.

[Rubberbiscuit]

Say goodbye to that money. Never going to see it again.

It's just like those Pay Day loan companies, except on a bigger scale. The people who resort to borrowing from them are the ones who can least afford the 60%/annum interest they wind up charging on outstanding amounts.

The only difference is, Air Canada can default and continue operating on Government gratuities while the poor sod who defaults on a thousand dollar loan is ruined and unable to get any credit for the next seven years.

Air Canada is in trouble. Their liabilities are part of that trouble. Increasing their liabilities, principle and servicing, is the wrong thing to do. They might as well be rearranging deck chairs on the Titanic.

Let it fail, and let some venture capitalists pick up the pieces for pennies on the dollar and make a profitable company again.

Well said, and I agree with you. The $1Billion is nothing more than a drop in the bucket considering Air Canada's current state. They can sugarcoat the whole restucturing process as much as they wan't, but nothing will change in the long term unless very significant reductions in operating costs are achieved. I hope they can turn it around, but I don't see it happening without another bankruptcy unfortunately. This money will only delay the inevitable the way I see it. These loans will become handouts once they file and we can kiss goodbye to $250 mill in taxpayer money.

[Mrs.Robinson]

Let air Canada go bankrupt, they are a loser Company. Help Jazz and Westjet pick up the domestic capacity and let foreign airlines do the international for a period of 3 years until westjet or Jazz have the capacity and equipment to do it. I'm sure with all the extra capacity airlines have the would love to do it even if it's for a short period. Once the 3 years is up hopefully the economy is back up and those foreign airline will be able to use there aircraft to increase capacity (on there old routes) as the economy picks up. Its a win win situation for all, Tax payer save money, Companies who do make money (westjet Jazz) will not have tax money working against them, Foreign airline can use the Capacity to help there bottom line.

[privateer]

Code: Select all

Let air Canada go bankrupt, they are a loser Company. Help Jazz and Westjet pick up the domestic capacity and let foreign airlines do the international for a period of 3 years until westjet or Jazz have the capacity and equipment to do it. I'm sure with all the extra capacity airlines have the would love to do it even if it's for a short period. Once the 3 years is up hopefully the economy is back up and those foreign airline will be able to use there aircraft to increase capacity (on there old routes) as the economy picks up. Its a win win situation for all, Tax payer save money, Companies who do make money (westjet Jazz) will not have tax money working against them, Foreign airline can use the Capacity to help there bottom line.

As much as I don't want to admit it, I think this is a good idea.

[whiteguy]

Let air Canada go bankrupt, they are a loser Company. Help Jazz and Westjet pick up the domestic capacity and let foreign airlines do the international for a period of 3 years until westjet or Jazz have the capacity and equipment to do it. I'm sure with all the extra capacity airlines have the would love to do it even if it's for a short period. Once the 3 years is up hopefully the economy is back up and those foreign airline will be able to use there aircraft to increase capacity (on there old routes) as the economy picks up. Its a win win situation for all, Tax payer save money, Companies who do make money (westjet Jazz) will not have tax money working against them, Foreign airline can use the Capacity to help there bottom line.

Would Jazz make money without the CPA?

[Mrs.Robinson]

Jazz would have to make money. Without Air Canada's seats there would me a seat deficit in the Canadian market. With Jazz's low cost structure (I'm just guessing) they may be even more profitable then Westjet. I think they would both do well , Jazz pays less but Westjet has more seats per aircraft. The only loser my be the consumers who might have to pay more for tickets(maybe a lot more).

[wallypilot]

P.S. Anyone who believes that Air Canada isn't
still part of the Federal government, probably believes
that NavCan isn't either

I'm not super knowledgeable about the recent involvement of gov't in AC. I know that in decades past it had been totally government owned, then at some point the gov't divested itself of AC and passed the Air Canada Public Participation Act.

Is this Law still in force, and can someone post a coles notes version of AC's obligations under this act?

[tonysoprano]

Let air Canada go bankrupt, they are a loser Company. Help Jazz and Westjet pick up the domestic capacity and let foreign airlines do the international for a period of 3 years until westjet or Jazz have the capacity and equipment to do it. I'm sure with all the extra capacity airlines have the would love to do it even if it's for a short period. Once the 3 years is up hopefully the economy is back up and those foreign airline will be able to use there aircraft to increase capacity (on there old routes) as the economy picks up. Its a win win situation for all, Tax payer save money, Companies who do make money (westjet Jazz) will not have tax money working against them, Foreign airline can use the Capacity to help there bottom line.

Holy F***!!
"Take a toke and hold the smoke and blow your f*n' mind".

[billy ray valintine]

uncle bobby should be sharing a cell with Connie black,and . Manson
he's made a fortune at the expense of this company.
another useless CEO!

[CSk3RampBOY]

Let air Canada go bankrupt, they are a loser Company. Help Jazz and Westjet pick up the domestic capacity and let foreign airlines do the international for a period of 3 years until westjet or Jazz have the capacity and equipment to do it. I'm sure with all the extra capacity airlines have the would love to do it even if it's for a short period. Once the 3 years is up hopefully the economy is back up and those foreign airline will be able to use there aircraft to increase capacity (on there old routes) as the economy picks up. Its a win win situation for all, Tax payer save money, Companies who do make money (westjet Jazz) will not have tax money working against them, Foreign airline can use the Capacity to help there bottom line.

Just brilliant!

What do you think is going to happen to the international network if Air Canada folds? Wait until the day that WestJet & Jazz will be capable of longhaul? All international carriers would just suddenly give up their marketshare and people would go back to flying with a Canadian carrier? That the Network would somehow be restored and airports are going to give back the slots lost by AC? Every foreign carrier that has a foothold in Canada is quickly going to take advantage of the situation and capitalize the Market! Think about how it would affect the pilot market in Canada and how many potential jobs that would be lost?

Air Canada is in a big mess, no dispute. But you have to look at the positive side of what Air Canada has and the network it provides. Think about the Value of the slots it holds in FRA, LHR and CDG$$$$. All would be lost if Air Canada goes! Do you think Lufthansa is goin to want to negotiate with West Jet in the future? Maybe or maybe not?

True, the government is in bed with AC. But they are preventing foreign carriers like Emirates from saturating the market with their proposal to fly to every major Canadian city.
Again, think about how many potential pilots jobs in Canada that would be lost?

[Mrs.Robinson]

CSk3RampBOY

Just brilliant!

Canadian Tax payers giving money that they will never get back.

If Air Canada can make it work without Tax payer money I'm all for it. Air Canada has to go into bankruptcy and solve the problem and fix the problem once and for all, if the pensions have to go so be it, if the unions have to go so be it.

If Air Canada get make money and double there pension do it, just don't expect Canadian tax payers to pay for Air Canada pension when they themselves don't get one.

Lets Raise taxes and give all Canadians the same pensions that Air Canada has , and GM.

[CSk3RampBOY]

CSk3RampBOY

Just brilliant!

Canadian Tax payers giving money that they will never get back.

If Air Canada can make it work without Tax payer money I'm all for it. Air Canada has to go into bankruptcy and solve the problem and fix the problem once and for all, if the pensions have to go so be it, if the unions have to go so be it.

If Air Canada get make money and double there pension do it, just don't expect Canadian tax payers to pay for Air Canada pension when they themselves don't get one.

Lets Raise taxes and give all Canadians the same pensions that Air Canada has , and GM.

You didn't get what I was talking about. Brankruptcy protecting seems like the best alternative for Air Canada and it might be an option in near future. But for Air Canada to become completely insolvent and shut down operations? Not Good!

I agree that our taxpayer shoudln't bail them out. But at the same time, it's imporyant that Air Canada stays afloat. Remember that Air Canada can become a profitable airline. They just need to shed the tremendous cost that they incure.

[Mrs.Robinson]

Sorry for the misunderstanding.

I agree air Canada shutting down = no good

Air Canada shutting down is better then Canadian tax payer giving even 1 $

or if all the creditor, and unions agree during the bankruptcy process that the federal government would be the #1 creditor should things go south, So the feds would be the first ones paid after employee paychecks (not pension plans) during the asset sale

[yycflyguy]

This "loan" will make the government all kinds of revenue. Show me how else you can make 12.75% in today's market.

[C-FABH]

This "loan" will make the government all kinds of revenue. Show me how else you can make 12.75% in today's market.

Who cares about loans. Find me an unmarked RCMP car and a radar gun, it's like a licence to print money.

[Spokes]

This "loan" will make the government all kinds of revenue. Show me how else you can make 12.75% in today's market.

Well off topic a bit, but since you asked:

http://www.globefund.com/servlet/Page/d ... 2633977694

Price for Stone & Co. Flagship Grwth & Inc. A is currently $2.30 per unit. Monthly dividend payback is $.045 per unit. This equals 1.96% per month return or aproximately 23.5% per annum. Probably wont help AC much, but like I said- you asked.

[Mrs.Robinson]

Get a 100M $ loan and don't pay it back is a good return.

[sepia]

Get a 100M $ loan and don't pay it back is a good return.

The loans are secured. Obviously this concept is new, or not understood by you. The loan by the government is secured by assets which Air Canada holds. If Air Canada is unable to repay the loan, the assets which were used to secure the loan are taken by the pool of entities which loaned the money. The assets can then be sold off to repay the loan, or kept to be used by the lenders. If you look at the values attached to some of the assets like the 777's it's a fraction of the real world value.

I honestly hope you can read further on the topic, maybe understand it a bit before you ramble on about something which you haven't the slightest clue.