July 30, 2009

Air Canada gets $1 billion infusion

Financially troubled Air Canada has been granted a $1 billion shore-up from federal agencies and outside lenders, the company said.

The airline's Chief Executive Officer Calin Rovinescu said in a statement $600 million of the package is from a syndicate of lenders that carries a 12.75 percent annual interest rate, the Globe and Mail reported. The balance will come from several Canadian government agencies, although the interest rates weren't published for those..

By any measure, raising $1 billion in new liquidity is a tremendous achievement, particularly in view of current credit markets and the state of the airline industry, Rovinescu said in the statement.

Since the economic downturn last year, the airline entered and emerged from bankruptcy protection and then went through marathon negotiations with its five unions earlier this year, the Globe said.

In exchange for a 15 percent share in Air canada, the unions agreed to a moratorium on pension funding, which so far has a $2.9 billion deficit. The federal government approved the deal, as pensions are federally regulated.