Air Canada said it is pulling out of the government bailout program, leaving much of the interest-bearing credit facility untouched amid an improved financial outlook.
The federal government in April approved $5.375-billion in loans to Canada’s largest airline, which had for months called on Ottawa to give it financial aid amid the pandemic that closed borders and halted most air travel.
Air Canada said on Friday it will use $1.4-billion in government aid to provide customer refunds, but walk away from the unused portion of the package, worth $3.975-billion.
The federal government bought $500-million in Air Canada shares at $23.18 each and owns 6 per cent of the carrier. Air Canada shares traded at about $24 on Friday.
Air Canada said its recently completed financing, worth $7.1-billion with extended debt maturity dates, give it enough cash to abandon the remainder of the taxpayer package, which it can without penalty. In the latest quarter, Montreal-based Air Canada said it had $9.5-billion in cash and equivalents, and $4.9-billion in available credit. This included the $3.975-billion cancelled on Friday.
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In a statement, Air said its recovery from the pandemic continues, adding routes and recalling laid-off employees.
For much of the pandemic, Air Canada and other airlines refused to give refunds to most customers whose flights were cancelled. The carriers said refunds would cause them financial ruin and said the government should provide aid much like other countries had done.
Air Canada said on Friday it has used about $1.2-billion of the $1.4-billion loan to give refunds.
In the three months ended Sept. 30, Air Canada lost $640-million but operating revenue nearly tripled as seat sales rose. Seat capacity rose by 87 per cent from the same period in 2020 but is down by 66 per cent from 2019.
Konark Gupta, a Bank of Nova Scotia stock analyst, said Air Canada’s move could signal it is moving to reduce its debt load over the next few years. “While the pandemic is not over yet, we see this as a strong sign of [Air Canada’s] confidence in air travel recovery, which was somewhat reflected” in the third-quarter financial results.
In September, Air Canada’s total liabilities were $30.2-billion, including long-term debt and plane lease commitments.
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