Agreement between the Federal Government and Air Canada on Refunds and Financial Support

Updated May 31, 2024
Air Canada A321 Montreal
To the point The federal government and Air Canada have reached an agreement for financial assistance, including the refund of unused airline tickets.

The federal government and Air Canada have reached an agreement for a multi-billion dollar aid package, including a fund to reimburse unused airline tickets following the COVID-19 pandemic.

Talks have been ongoing for several months, and the Government of Canada has consistently made any federal assistance conditional on the refund of cancelled flights and the re-establishment of several regional routes that have been removed.

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Refunds

As part of the financial package, Air Canada has agreed to a number of commitments related to customer refunds, service to regional communities, restrictions on the use of the funds provided, employment and capital expenditures. These include:

  • Beginning April 13, 2021, offering eligible customers who purchased non-refundable fares but did not travel due to COVID-19 since February 2020, the option of a refund to the original form of payment. In support of its travel agency partners, Air Canada will not retract agency sales commissions on refunded fares;
  • The resumption of service or access to Air Canada’s network for nearly all regional communities where service was suspended because of COVID-19’s impact on travel, through direct services or new interline agreements with third party regional carriers;
  • Restricting certain expenditures, and restricting dividends, share buybacks and senior executive compensation;
  • Obligations to maintain employment at levels which are no lower than those at April 1st, 2021; and
  • The completion of the airline’s acquisition of 33 Airbus A220 aircraft, manufactured at Airbus’ Mirabel, Quebec facility. Air Canada has also agreed to complete its existing firm order of 40 Boeing 737 Max aircraft. Completion of these orders remains subject to the terms and conditions of the applicable purchase agreements.
airbus a220 – air canada – 13
Airbus A220 - Air Canada

The details of this aid

The financial package provides for fully repayable loans that Air Canada would only draw down as required, as well as an equity investment, and is comprised of:

  • Gross proceeds of $500 million for Air Canada shares at a price of $23.1793 per share;
  • $1.5 billion in the form of a secured revolving credit facility at a 1.5% premium to the Canadian Dollar Offered Rate (CDOR); the facility is secured on a first lien basis by the assets of Aeroplan Inc., Air Canada’s shares in Aeroplan as well as certain assets of Air Canada, including certain intellectual property relating to the Aeroplan loyalty program;
  • $2.475 billion in the form of three unsecured non-revolving credit facilities of $825 million each with: the first, five-year tranche at a 1.75% premium to CDOR per annum; the second, six-year tranche at 6.5% per annum (increasing to 7.5% after 5 years); and the third, seven-year tranche at 8.5% per annum (increasing to 9.5% after 5 years);
  • As part of the financial package, Air Canada issued an aggregate of 14,576,564 warrants exercisable for the purchase of an equal number of Air Canada shares, subject to customary adjustments, at a price of $27.2698 per share during a 10-year term, representing 10% of the total commitment available under the above secured and unsecured credit facilities; 50% of the warrants vested concurrently with the implementation of the credit facilities and the remaining 50% of the warrants will vest on a proportional basis to the amounts that Air Canada may draw under the above unsecured credit facilities;
  • Up to approximately $1.4 billion in the form of an unsecured credit facility tranche to support customer refunds of non-refundable tickets. The facility will have a seven-year term and carry an annual interest rate of 1.211%.
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Jean-Maximilien Voisine

Jean-Maximilien Voisine

Jean-Maximilien Voisine
Jean-Maximilien is an expert in Canada and France about Loyalty programs, Credit cards and Travel. He is the Founding President of Milesopedia.
All posts by Jean-Maximilien Voisine

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