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An Air Canada sign stands in Benito Juarez International Airport in Mexico City on May 20, 2020.PEDRO PARDO/AFP/Getty Images

Air Canada is tapping securities markets for $1.4-billion as Canada’s largest airline bolsters its cash balance amid a near collapse of global air travel.

The carrier on Thursday said it will price a previously announced offering of 30.8 million shares at $16.25 each for a total $500.5-million and raise US$650-million in a private placement of bonds.

The financings will be used to “supplement our working capital and for other general corporate purposes,” the airline said. “The net proceeds will serve to increase Air Canada’s cash position, thereby allowing for additional flexibility both from an operational standpoint and in the implementation of planned mitigation and recovery measures in response to the COVID-19 pandemic.”

The bonds, convertible to shares, pay 4 per cent a year and mature on July 1, 2025.

Air Canada has parked about 225 planes, cut its schedule by about 90 per cent and placed most of its 38,000 employees in a government program that covers 75 per cent of wages. About 20,000 of these employees will be laid off, Air Canada has said, as the airline adjusts to reduced demand for air travel when the pandemic eases.

Air Canada lost $1-billion in the first three months of 2020 and burned through $22-million a day in March as governments closed borders and told people to avoid non-essential travel.

The airline responded by slashing costs and tapping credit markets to shore up its books, drawing on credit worth $1-billion, borrowing US$600-million secured by aircraft and taking a $788-million loan from Export Development Canada, a government agency.

Air Canada had $6.5-billion in cash at the end of March, an amount that will climb to $9.2-billion after tapping credit lines, borrowing cash and the stock and bond offerings priced on Thursday.

Air Canada and other domestic carriers are refusing to refund most air fares, hanging on to the cash as they try to survive until demand for travel returns. The airline had $2.6-billion in advance ticket sales at the end of March and refunded seats worth $142-million, the company said in a regulatory filing.

Unlike in Europe and the United States, the Canadian airline regulator has allowed carriers to give grounded customers two-year vouchers instead of refunds, angering cash-strapped consumers who might not want to fly for the foreseeable future.

Unhappy customers can file an appeal to the same regulator, the Canadian Transportation Agency, which says it will decide each case “on its merits.”

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/03/24 10:41am EDT.

SymbolName% changeLast
AC-T
Air Canada
+0.51%19.74

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