# Air Canada support package



## Money172375 (Jun 29, 2018)

Air Canada and Government of Canada Conclude Agreements on Liquidity Program


Air Canada announced today that it has entered into a series of debt and equity financing agreements with the Government of Canada, which will allow Air Canada to access up to $5.879 billion in...



aircanada.mediaroom.com


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## MrMatt (Dec 21, 2011)

Money172375 said:


> Air Canada and Government of Canada Conclude Agreements on Liquidity Program
> 
> 
> Air Canada announced today that it has entered into a series of debt and equity financing agreements with the Government of Canada, which will allow Air Canada to access up to $5.879 billion in...
> ...


As long as default includes a 50% equity stake, I'm okay with this.


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## ian (Jun 18, 2016)

MrMatt said:


> As long as default includes a 50% equity stake, I'm okay with this.


And cash refunds to those who booked for those who had flights cancelled by the airline. That, apparently, was the fly in the oitment. AC did NOT want to provide refunds, the Government refused until this policy was rescinded.


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## MrMatt (Dec 21, 2011)

ian said:


> And cash refunds to those who booked for those who had flights cancelled by the airline. That, apparently, was the fly in the oitment. AC did NOT want to provide refunds, the Government refused until this policy was rescinded.


Hey, if they don't want to pay creditors, they should go under.
The whole point of government loans is that nobody is willing to lend them money.


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## james4beach (Nov 15, 2012)

MrMatt said:


> As long as default includes a 50% equity stake, I'm okay with this.


Canada didn't take any equity in the large banks when rescuing them.

Same standards must apply to all companies.

The nation's largest airline is just as "essential" as Big Five banks.


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## Covariance (Oct 20, 2020)

ian said:


> And cash refunds to those who booked for those who had flights cancelled by the airline. That, apparently, was the fly in the oitment. AC did NOT want to provide refunds, the Government refused until this policy was rescinded.


Not a win for the Feds on that point. The Feds gave them one loan that is only for use extending refunds: $1.4Billion, seven year term, and a rate of 1.211% Cheapest loan of the package, below market, and seems to be priced at GoC 7yr rate. Loan is unsecured.


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## MrMatt (Dec 21, 2011)

james4beach said:


> Canada didn't take any equity in the large banks when rescuing them.
> 
> Same standards must apply to all companies.
> 
> The nation's largest airline is just as "essential" as Big Five banks.


These are different "rescues"
The "rescue" of the bank, was the standard legislated function of the banking industry, and it happened at market rates. The banks were also solvent at the time.

This is a below market rate subsidy to a company that has a history of mismanagement, and is currently bankrupt. Over a billion dollars of it is just to pay their creditors.


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## ian (Jun 18, 2016)

We lost our shirts bailing out General Motors. More than once. GM played us like a fiddle. 

Then the Government sold the shares too early, against the best advice, at a loss solely in order to display a pre election 'balanced' budget.


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## MrMatt (Dec 21, 2011)

ian said:


> We lost our shirts bailing out General Motors. More than once. GM played us like a fiddle.
> 
> Then the Government sold the shares too early, against the best advice, at a loss solely in order to display a pre election 'balanced' budget.


Yup, but voters love those corporate bailouts.


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## sags (May 15, 2010)

ian said:


> We lost our shirts bailing out General Motors. More than once. GM played us like a fiddle.
> 
> Then the Government sold the shares too early, against the best advice, at a loss solely in order to display a pre election 'balanced' budget.


Yea, better that GM had gone bankrupt, stopped paying taxes and terminated the tens of thousands of workers at GM and all their suppliers who have been paying taxes and supporting the economy. Better that GM was gone than transitioning into production of EV vehicles in Canada. Ontario was also bailed out because they were were on the hook for a big whack of guaranteed pension benefits to terminated GM employees as well. The company had paid premiums to be in the PBGF for decades and Ontario didn't have the money to pay the pension liability.

The "government" that sold the shares "cheaply"was the Harper Conservatives.

GM workers and retirees also had to accept a lot of major concessions. The pension is no longer guaranteed by Ontario. Employees lost vacation time, bonuses and wage increases, and retirees had their COLA taken away. All these years later, the GM pensioners lose a little more each year because the COLA was never restored.

So everyone chipped in to save the company......and to my view.......that was a good thing.

In these corporate bailouts there are benefits and consequences for both providing support or not providing support.


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## MrMatt (Dec 21, 2011)

sags said:


> Yea, better that GM had gone bankrupt, stopped paying taxes and terminated the tens of thousands of workers at GM and all their suppliers who have been paying taxes and supporting the economy. Better that GM was gone than transitioning into production of EV vehicles in Canada. Ontario was also bailed out because they were were on the hook for a big whack of guaranteed pension benefits to terminated GM employees as well. The company had paid premiums to be in the PBGF for decades and Ontario didn't have the money to pay the pension liability.
> 
> The "government" that sold the shares "cheaply"was the Harper Conservatives.
> 
> ...


I think bailing out greedy and overpaid GM workers was morally the wrong thing to do.
I understand the reasoning why they did, and it makes a lot of sense.

so they did the wrong thing for not completely wrong reasons.


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## ian (Jun 18, 2016)

sags said:


> Yea, better that GM had gone bankrupt, stopped paying taxes and terminated the tens of thousands of workers at GM and all their suppliers who have been paying taxes and supporting the economy. Better that GM was gone than transitioning into production of EV vehicles in Canada. Ontario was also bailed out because they were were on the hook for a big whack of guaranteed pension benefits to terminated GM employees as well. The company had paid premiums to be in the PBGF for decades and Ontario didn't have the money to pay the pension liability.
> 
> The "government" that sold the shares "cheaply"was the Harper Conservatives.
> 
> ...





sags said:


> Yea, better that GM had gone bankrupt, stopped paying taxes and terminated the tens of thousands of workers at GM and all their suppliers who have been paying taxes and supporting the economy. Better that GM was gone than transitioning into production of EV vehicles in Canada. Ontario was also bailed out because they were were on the hook for a big whack of guaranteed pension benefits to terminated GM employees as well. The company had paid premiums to be in the PBGF for decades and Ontario didn't have the money to pay the pension liability.
> 
> The "government" that sold the shares "cheaply"was the Harper Conservatives.
> 
> ...


OK for one bailout. There is a sad history of GM bailouts. Why bail out a company when they are making crap products that the market was not buying. Sags...cola pensions in the private sector is the exception, NOT the standard unless the recipients elect to opt for a lesser pension amount in lieu of COLA. They simply joined the real world of pensioners. Mine has been the same amount for the past nine years....I am not complaining about it.


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## Fain (Oct 11, 2009)

sags said:


> Yea, better that GM had gone bankrupt, stopped paying taxes and terminated the tens of thousands of workers at GM and all their suppliers who have been paying taxes and supporting the economy. Better that GM was gone than transitioning into production of EV vehicles in Canada. Ontario was also bailed out because they were were on the hook for a big whack of guaranteed pension benefits to terminated GM employees as well. The company had paid premiums to be in the PBGF for decades and Ontario didn't have the money to pay the pension liability.
> 
> The "government" that sold the shares "cheaply"was the Harper Conservatives.
> 
> ...


100% GM should have been bailed out but could have been structured differently. USA structured bank bailouts to fannie mae, Freddie mac differently. Convertible debt would be preferred. What is GM do? Say no? Subsidies in manufacturing can VERY beneficial (e.g. China, Germany). Taking a penny pinching free market approach will just lose good manufacturing jobs


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## james4beach (Nov 15, 2012)

MrMatt said:


> Yup, but voters love those corporate bailouts.


It's not a bail out. These are loans to Air Canada, and they have to pay them back. It's liquidity support.

When the central banks gave billions of $ in emergency loans (liquidity support) to the banks, everyone in Canada started pissing themselves with joy over how brave and successful the banks must be. The CMHC even bought up assets from the banks; those weren't loans by the way.

The liquidity support / loans, for banks, were paid back. It was declared a resounding success.

Loans were given to the banks. Loans are now given to Air Canada. What's the big deal?


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## james4beach (Nov 15, 2012)

One difference with GM is that they are a foreign company, and have no obligation - or intention - to continue supporting Canadian jobs or our economy.

Air Canada provides vital infrastructure within our country. It's no contest. Air Canada is more important than GM and is more like critical infrastructure, kind of like the banks.


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## kcowan (Jul 1, 2010)

You can bet a part of thic compensation was for cancelling all snowbird flights, a totally symbolic action to cover for their lack of attention to other international flyers. Symbolic government, a vary expensive ineffective way.


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## MrMatt (Dec 21, 2011)

james4beach said:


> It's not a bail out. These are loans to Air Canada, and they have to pay them back. It's liquidity support.
> 
> When the central banks gave billions of $ in emergency loans (liquidity support) to the banks, everyone in Canada started pissing themselves with joy over how brave and successful the banks must be. The CMHC even bought up assets from the banks; those weren't loans by the way.
> 
> ...


Below market rate loans << that's the bailout.
Also they're insolvent, I would be surprised if they pay them back in the next decade.
If they included an equity surrender provision, I'd actually be okay with lending an insolvent company money.
I don't agree with the GM bailout either, but at least they took an equity position.

The overnight lending to the banks was at market rates, in fact the Bank of Canada has built rate controls into the financial industry.


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## bgc_fan (Apr 5, 2009)

james4beach said:


> It's not a bail out. These are loans to Air Canada, and they have to pay them back. It's liquidity support.
> 
> When the central banks gave billions of $ in emergency loans (liquidity support) to the banks, everyone in Canada started pissing themselves with joy over how brave and successful the banks must be. The CMHC even bought up assets from the banks; those weren't loans by the way.
> 
> ...


I'd still call it a bailout as Air Canada wouldn't have secured funds any other way.

That being said, at least the government is getting a $500M stake in exchange, worth about 5-6%, given the current market cap of $8.88B. If the government is going to get involved, I'd prefer that it gets some of the benefits when the company regains its footing and stock price stabilizes or climbs up.


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## MrMatt (Dec 21, 2011)

bgc_fan said:


> I'd still call it a bailout as Air Canada wouldn't have secured funds any other way.
> 
> That being said, at least the government is getting a $500M stake in exchange, worth about 5-6%, given the current market cap of $8.88B. If the government is going to get involved, I'd prefer that it gets some of the benefits when the company regains its footing and stock price stabilizes or climbs up.


They should have at least a 50% equity stake for the amount of cash they're giving.


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## james4beach (Nov 15, 2012)

bgc_fan said:


> I'd still call it a bailout as Air Canada wouldn't have secured funds any other way.


Neither could any of the Big Five banks. They were in a liquidity crunch and couldn't borrow money.

Government institutions (central banks) gave them their loans and liquidity, when the market refused to give them loans. It's a very similar bailout except for the sleight of hand of going through a central bank.


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## bgc_fan (Apr 5, 2009)

james4beach said:


> Neither could any of the Big Five banks. They were in a liquidity crunch and couldn't borrow money.
> 
> Government institutions (central banks) gave them their loans and liquidity, when the market refused to give them loans. It's a very similar bailout except for the sleight of hand of going through a central bank.


I must have missed something, are people arguing that providing money to the banks wasn't a bailout?


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## Covariance (Oct 20, 2020)

The logical extension of this is the Feds, Central Banks bailed out the Pension Funds, Boomers, Home owners and essentially all asset owners that would have had to sell any assets for less than Feb 2020 valuation. Cheap money has put a floor under every asset class.


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## MrMatt (Dec 21, 2011)

bgc_fan said:


> I must have missed something, are people arguing that providing money to the banks wasn't a bailout?


Not quite.
The government provided market rate liquidity support to the banks, so that they would keep acting in a way that the government wanted them to.
Providing market rate loans to solvent functioning entities isn't IMO a bailout.
The banks could have fulfilled their obligations without these loans, the government simply didn't want them to proceed down that path, for good reason.

However I do think that providing below market rate loans to an insolvent entity is a bailout. This is the case with Air Canada.


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## james4beach (Nov 15, 2012)

bgc_fan said:


> I must have missed something, are people arguing that providing money to the banks wasn't a bailout?


Quite a few rich people have argued that the Canadian banks weren't ever bailed out. Lobbyists for the Canadian banks argue the same thing, to make their industry look healthy and powerful.

I maintain that the Big Five banks _were_ bailed out. They received emergency loans, after being unable to finance themselves through the market. To rescue them, (pseudo) government entities gave them artificially cheap loans through special lending facilities.

Just like Air Canada.


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## MrMatt (Dec 21, 2011)

james4beach said:


> Quite a few rich people have argued that the Canadian banks weren't ever bailed out. Lobbyists for the Canadian banks argue the same thing, to make their industry look healthy and powerful.
> 
> I maintain that the Big Five banks _were_ bailed out. They received emergency loans, after being unable to finance themselves through the market. To rescue them, (pseudo) government entities gave them artificially cheap loans through special lending facilities.
> 
> Just like Air Canada.


Yes even people who aren't rich have suggested that market rate liquidity provisions were not really bailouts. They're a normal function of our financial system.

If there is a bailout, it should include proportional equity surrender.

Some people want to engage in "whataboutism" so they call everything a bailout.

I'm okay with giving Air Canada loans of 60% of their market cap, as long as they include a provision to surrender that 60% of market cap when they dont' pay them back. Remember Air Canada is bankrupt.


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## bgc_fan (Apr 5, 2009)

james4beach said:


> Quite a few rich people have argued that the Canadian banks weren't ever bailed out. Lobbyists for the Canadian banks argue the same thing, to make their industry look healthy and powerful.
> 
> I maintain that the Big Five banks _were_ bailed out. They received emergency loans, after being unable to finance themselves through the market. To rescue them, (pseudo) government entities gave them artificially cheap loans through special lending facilities.
> 
> Just like Air Canada.


Well, it's simple to call a spade a spade. Direct government infusion of capital is a bailout. While Air Canada needs the funds, it would probably have remained solvent if it started cost cutting, you know, reduce all those routes that actually don't make money. Of course, then people would complain why it's so expensive to take flights to under-served communities.


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## MrMatt (Dec 21, 2011)

bgc_fan said:


> Well, it's simple to call a spade a spade. Direct government infusion of capital is a bailout. While Air Canada needs the funds, it would probably have remained solvent if it started cost cutting, you know, reduce all those routes that actually don't make money. Of course, then people would complain why it's so expensive to take flights to under-served communities.


They should cut routes that don't make money, close locations that don't make sense.
Ditch the expensive unions etc.
But they get government handouts to maintain those things.

If it's going to be a crown corp, be a crown corp. If it's going to pretend to be a private company, be a private company.
But this hybrid scam isn't acceptable.


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## sags (May 15, 2010)

I think it is better to look at results, rather than rely on political ideology.

There is no doubt that the government equity positions in GM saved tens of thousands of jobs, and allowed it to remain the successful company it is today with manufacturing plants in Canada. Saving the company has generated revenues for the government since the bailout. The GM Oshawa plant also produced 1 million surgical masks for the government during the pandemic.

The question is if Air Canada has a viable business if they receive loan guarantees from the government.


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## MrMatt (Dec 21, 2011)

sags said:


> I think it is better to look at results, rather than rely on political ideology.
> 
> There is no doubt that the government equity positions in GM saved tens of thousands of jobs, and allowed it to remain the successful company it is today with manufacturing plants in Canada. Saving the company has generated revenues for the government since the bailout. The GM Oshawa plant also produced 1 million surgical masks for the government during the pandemic.
> 
> The question is if Air Canada has a viable business if they receive loan guarantees from the government.


There is no doubt we paid a lot of money for those jobs.

Also look at the tens of thousands of jobs we have from Ford & Toyota & Honda, who didn't need massive bailouts.

Lets say GM shut those plants and stopped making vehicles, people would just buy from another company.

I don't think it is the governments job to prop up failing companies. If they're a bad company, let the investors lose their money.

Like I said about Air Canada, if airlines are essential, go ahead, keep it running.
But don't give my tax dollars to subsidize their bad business. No bonuses for the poor management, no return for the investors.


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## nortel'd (Mar 20, 2012)

Thanks to the government bail out, I just received a refund back to my credit card for the Air Canada travel credits Air Canada gave me for the March 21, 2020 direct flight from Ottawa to Orlando that I, myself, cancelled on March 11, 2020.


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## MrMatt (Dec 21, 2011)

nortel'd said:


> Thanks to the government bail out, I just received a refund back to my credit card for the Air Canada travel credits Air Canada gave me for the March 21, 2020 direct flight from Ottawa to Orlando that I, myself, cancelled on March 11, 2020.


Saves Air Canada fighting thousands of small claims lawsuits.


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## sags (May 15, 2010)

Harper was desperate to balance the budget in 2015 so he sold 73 million GM shares for $36 US a share.

Today those shares are priced at $56 US a share. The government could have made money on the loan plus collected tax revenues ever since.

Harper was an idiot and he still lost the election because Canadians knew he was an idiot.


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## diharv (Apr 19, 2011)

But Trudeau is also an idiot and everybody knows he's an idiot, yet he won the last election.


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