Air Canada’s Financing Deal Now Worth Over $1 Billion

Over the past week, Air Canada has been working to raise funds to finance its operations and stay…

Air Canada’s Financing Deal Now Worth Over $1 Billion

Over the past week, Air Canada has been working to raise funds to finance its operations and stay afloat during these challenging times. Recently, the airline increased the size of its financing deal up to C$1.4 billion – or US$1.02 billion.

Air Canada is resuming a limited schedule to the United States as of this week. Photo: Air Canada

Air Canada issued the following statement as part of a recent press release:

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

Where is this money coming from?

In short, the money is coming from anyone willing and eligible to invest in the airline, essentially issuing debt and/or a stake in the company.

To secure additional funds, Air Canada is issuing 30.8 million shares at C$16.25 (US$11.80) to raise C$500.5 million (US$363 million). On top of this, the airline is issuing senior convertible notes to raise US$650 million. These notes will mature on July 1st, 2025, with an annual interest rate of 4%. They can also be converted into Air Canada shares at a price equivalent to US$15.35 per share.

CTV News reports that the carrier has lost more than C$1 billion (US$700 million) in the last quarter. With the downturn in air travel and passenger demand, the airline has had to ground the majority of its fleet. At the same time, the airline has had to deal with fixed costs such as aircraft leases, insurance, maintenance, and more.

Air Canada
Air Canada was also hit in 2019 by the 737 MAX crisis. While its new jets sit parked in the desert, the airline must still ensure proper maintenance while paying for parking facilities. Photo: Getty Images

20,000 jobs to be cut

The news of financing comes just two weeks after a company memo revealed that the airline has plans to cut roughly 20,000 jobs from its workforce. With a total employee count surpassing 38,000, this represents over half of the airline.

B787-8 Tail, Air Canada
Air Canada may continue with its plan to cut 20,000 jobs from its workforce in the next week. Photo: Air Canada

Initially, many were hoping that a workforce-reduction of this magnitude could be avoided with support from the Canadian government. However, despite nearly two full weeks passing, there has not been any news on the matter. Canadian Prime Minister, Justin Trudeau, remained vague on the topic when first asked about the news:

“I think we all know that this pandemic has hit extremely hard on travel industries and on the airlines particularly…That’s why we’re going to keep working with airlines, including Air Canada, to see how we can help even more than we have with the wage subsidy.” -Justin Trudeau, Prime Minister of Canada

Conclusion

With a three-year-recovery process anticipated for the airline, Air Canada is trying to secure its financial position as it goes through what CEO Calin Rovinescu calls “the darkest period ever in commercial aviation.”

Hopefully, the airline can secure the financing that it needs to sustain itself over the next few months. Ultimately, the goal is to avoid the same fate as Avianca and LATAM, airlines that have both filed for Chapter 11 Bankruptcy protection in the United States.

If you could invest in Air Canada and buy up shares, would you do it? Let us know in the comments.

Source : Simple Flying More   

What's Your Reaction?

like
0
dislike
0
love
0
funny
0
angry
0
sad
0
wow
0

Next Article

Aeromexico Operates The Longest Flight In Mexican History

Amid the current pandemic worldwide, Aeromexico operated this week its longest flight ever. The Mexican carrier flew from…

Aeromexico Operates The Longest Flight In Mexican History

Amid the current pandemic worldwide, Aeromexico operated this week its longest flight ever. The Mexican carrier flew from Mexico City Airport to Shenzhen, in China. While it wasn’t a direct route, it did establish a milestone in Mexican aviation history. Let’s investigate further. 

Aeromexico has operated over 100 cargo flights between China and Mexico. Photo: Daniel Martínez Garbuno/Simple Flying.

Why did Aeromexico fly to Shenzhen?

Until 2019, Aeromexico had one commercial route into China. The airline flew three times a week to Shanghai. Nevertheless, amid the drama surrounding  (with a stopover in Barcelona), Aeromexico scrapped the route. 

At the moment, Aeromexico’s CEO, Andrés Conesa, said that the Mexican government never supported the carriers’ petitions to the Chinese government. Aeromexico constantly asked for a daily slot in Shanghai, but the Chinese never gave it, and Mexico never helped. So, in response, Aeromexico canceled its route to focus its efforts on its new Mexico City-Barcelona flight. 

Now, with the coronavirus pandemic, Aeromexico has started flying again to China. It is not transporting commercial passengers, . It has operated over a hundred flights to Shanghai and now to Shenzhen. 

During these past months, the airline has transported medical supplies to 14 countries. It has carried over 1,400 tons in 3,600 flight hours, Aeromexico said.  To do these flights, Aeromexico has used its fleet of 19 Boeing 787 Dreamliners.

Aeromexico
Aeromexico landed in Shenzhen for the first time in its history. Photo: Aeromexico.

Aeromexico’s longest flight ever

According to Aeromexico, its connection to Shenzhen was the longest flight it had ever had. But we have to take something into account: it was not entirely a direct flight. The non-stop route between Mexico and Shenzhen would be over 14,000 km. In the first leg of the trip, Aeromexico made a stop in Narita International Airport, Tokyo. 

Aeromexico said, 

“The plane departed last Sunday from Mexico City International Airport to Narita in Japan. There we made a technical stop and continued to Shenzhen, from where it came back on Monday in a direct flight to Mexico City, landing at dawn on 26 May.” 

The return trip was non-stop and became the longest flight ever for Aeromexico and for the Mexican air industry. It’s not hard to believe as only Aeromexico and  have operated transcontinental flights in the Mexican history. 

That being said, Aeromexico’s longest flight is still 2,000 km behind the .

Aeromexico Cargo
Aeromexico had a 91% decrease in passenger numbers in April. Photo: Aeromexico.

What’s up with Aeromexico at the moment?

Just like every other airline in Latin America, Aeromexico is currently in distress. In April, the carrier operated 

During the first quarter, the Mexican airline reported over US$100 million in losses and announced it reduced its fleet. The airline returned four Boeing 737-800 and two Boeing 737-700 to leasing companies. 

Aeromexico announced it obtained US$100 million through the company that runs its Salon Premier at Mexico City Airport. Meanwhile, the company expects to burn approximately US$50 million per month. 

There’s a silver lining, though. In June, Aeromexico expects to launch back 33 international frequencies (although it will not operate 27 international routes). For instance, from 1 June, Aeromexico will fly back to Seoul, once a week. 

What do you think of Aeromexico’s longest flight? Have you ever been to Shenzhen? Let us know in the comments.

Source : Simple Flying More   

This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies.