Due to its improved liquidity position and ongoing recovery from the pandemic, Air Canada has announced that it is withdrawing from further Government of Canada financial support. The support package, announced in April 2021, provided the carrier access to interest bearing loans of $5.375 billion through several separate credit facilities. To date, Air Canada has only accessed the facility solely dedicated to refunding customers' non-refundable tickets, while all other remaining facilities totalling $3.975 billion have not been used.
"Air Canada's recovery from COVID-19 continues. We are recalling employees, adding new routes and frequencies to our network, and restoring services, and, last quarter, we completed a $7.1-billion financing. Today, in another convincing sign of our progress, we are announcing our withdrawal from the major funding provisions of our support agreement with the Government of Canada for the $3.975 billion in facilities that were never accessed and remain unused," said Michael Rousseau, President and Chief Executive Officer.
"We deeply appreciate the Government of Canada's support as this helped maintain a level playing field at a time when governments around the world, recognizing the importance of air travel to their economies, were also assisting their national carriers in the face of the unprecedented downturn caused by COVID-19. In addition to helping preserve thousands of jobs and travel choice for Canadians, the assistance offered to Air Canada importantly served as an extra level of insurance that enabled us to raise additional liquidity on our own to manage the pandemic and give us sufficient resources to effectively compete in the post-pandemic marketplace."
Air Canada's support agreement with the government, under the Large Employer Emergency Financing Facility, provided access to up to $5.375bn in interest bearing loans and $500 million in equity for a total of $5.875bn in liquidity. It consisted of several elements, including: a $1.5bn secured revolving facility and three separate $825 million unsecured revolving credit facilities (all undrawn); a $1.4bn unsecured facility solely dedicated to refunding customers' non-refundable tickets ($1.2bn drawn and will be repaid under terms of the agreement); and the government purchased $500 million worth of Air Canada common shares at $23.18 per share, representing about 6 per cent of the current public float, which it continues to hold.
Air Canada also issued to the government about 14.6 million 10-year warrants for the purchase of an equal number of Air Canada shares, at a price of approximately $27.27 per share. With the termination of the operating credit facilities, half of these warrants, which have not yet vested with the government, have been cancelled immediately. Subject to TSX approval, Air Canada intends to call the balance of the vested warrants for cancellation as per their terms at fair market value.
In the third quarter of 2021, Air Canada completed a series of financing transactions generating gross proceeds of about $7.1bn. The airline stated that these financing transactions provided substantial liquidity to Air Canada and extended debt maturities out until near the end of the decade. With the release of its third quarter results on November 2, 2021, Air Canada reported that as of September 30, 2021, its unrestricted liquidity was approximately $14.4bn and consisted of roughly $9.5bn in cash and cash equivalents, short-term and long-term investments, and about $4.9 billion in available undrawn credit facilities, including the $3.975bn in unused government facilities being cancelled with this announcement.