Air Canada first out the gate with new COVID-19 related insurance
MONTREAL _ Air Canada has increased the size of a financing deal announced earlier this week to roughly $1.4 billion as it works to bolster its coffers to deal with the pandemic.
The company says the shares in the offering have been priced at $16.25 apiece. It plans to issue 30.8 million shares to raise about $500.5 million.
The airline will also issue US$650 million in convertible senior unsecured notes due in 2025, up from an initial plan for US$400 million.
The convertible notes will have an annual interest rate of four per cent and be convertible into Air Canada shares at a price of approximately US$15.35 per share.
The underwriters of the share offering have an option to purchase up to an additional 15 per cent of the shares, while initial buyers of the convertible notes will also have an option to purchase up to an additional 15 per cent.
Air Canada says it will use the cash to supplement its working capital and other general corporate purposes.
The airline said on May 4 it had $6.5 billion in unrestricted liquidity after drawing about $1 billion in March from its revolving credit facilities.
The carrier lost more than $1 billion last quarter and grounded the vast majority of its fleet as travel demand hovers near ground level while fixed costs persist, including aircraft leases, insurance and maintenance and hangar fees.
MONTREAL _ Air Canada is hoping to raise more than $1 billion in share and debt offerings to bolster its cash position amid the financial devastation of the COVID-19 pandemic.
The airline says it has launched a public offering for about $500 million worth of Class A and Class B voting shares.
It has also started a private placement of unsecured convertible notes _ a debt security that allows the owner to convert it into a shares _ for a total of US$400 million, or about C$550 million.
The stock and debt offerings include an over-allotment allowing the underwriters to buy an additional 15 per cent of the shares or convertible notes.
Air Canada says the net proceeds will bolster its cash position and provide it greater “flexibility” to manage the impact of the health crisis.
The airline said on May 4 that it had $6.5 billion in unrestricted liquidity after drawing about $1 billion in March from its revolving credit facilities.
The carrier lost more than $1 billion last quarter and grounded the vast majority of its fleet as travel demand stays at near rock-bottom levels while fixed costs persist, including aircraft leases, insurance and maintenance and hangar fees.
Completion of the offerings will be subject to various conditions, including approval from the Toronto Stock Exchange.
TD Securities Inc., J.P. Morgan Securities Canada Inc. and Citigroup Glob
Melissa Lopez-Martinez CTVNews.ca
TORONTO — As lockdown restrictions are slowly lifted around the world, the travel industry is looking at ways to get Canadians back on board.
While airlines, hotels and cruise ships are eager to open their doors, experts say convincing Canadians to travel again will be a tough sell.
Incentives are being introduced by airlines, resorts and hotels as a way to bring aboard new passengers, according to Allison Wallace, vice-president of communications at Flight Centre Canada.
“We should see better pricing and if not better pricing better value and that can be a room upgrade, it could be resort credits, it could be on board credits for cruise ships,” Wallace told CTV News.
Air Canada recently announced revisions to their goodwill policy that will allow customers of cancelled flights due to COVID-19 the option to receive either a travel voucher with no expiry date or bonus Aeroplan miles.
The airline also promised to reduce airfare for domestic flights as it introduced its new summer schedule including domestic and international flights. However, the airline is on a long road to recovery as it has been down 97 flights from the 220 it had the previous year amid the pandemic.
Tamer Hanna is among the many Canadians who had a flight cancelled because of the novel coronavirus. Hanna’s $5,000 Italian trip was put on hold and he received a credit for the flight but said he wants a refund.
“The travel situation is not going to be the same and its really about the safety of myself and my family at this point,” Hanna said in an interview with CTV News.
Many airlines are also catering to the post-pandemic world by introducing new cleaning measures and reconfigured seating. While these measures can help ensure safer travel, McGill University business professor Karl Moore said they will likely cost more for businesses to stay afloat.
“When you take away the middle seat at best you can get the planes maybe 70 per cent full, but at 70 per cent the planes can’t make money and that’s not a viable business model for them,” Moore in an interview with CTV News.
Travel experts say the new travel incentives are enticing, but the risk remains high. With COVID-19 now a known risk, companies are no longer offering travel insurance to cover the cost if Canadians become ill abroad.
President of Travel Secure Inc. Martin Firestone told CTV News that with no coverage, travellers risk incurring high hospital costs if they catch the virus while travelling.
“Quite frankly if you’re away and that second bout or third bout they talk about hits, you have the dilemma of having no coverage and being stuck in an emergency room in a hospital and you’re paying the tab,” Firestone said.
Industry leaders said travel interest is slowly picking up again, with most Canadians interested in domestic trips.
You were looking forward to your dream vacation or nice little gateway before coronavirus – now travel restrictions are in place and your flight has been canceled.
Don’t count on the airline giving you a cash refund, but you will likely get a voucher, which has many people fighting mad.
Barb Mills with Tsawwassen Insurance said the Canadian Transportation Agency endorsed airlines not refunding passengers for flights cancelled due to the COVID-19 or other reasons outside an airline’s control.
Mills noted airlines are only obliged to ensure passengers can complete their trip and are offering customers vouchers, adding most airlines are offering at least a year for people to use those vouchers.
The Canadian Life and Health Insurance Association says in the past, travel service providers usually provided consumers with refunds where the service provider was unable to provide service, but over the past month, that changed and they are now offering vouchers or credits that consumers can use for future travel.
On March 25, the Canadian Transportation Agency updated its endorsement of the use of vouchers or credits as an appropriate approach for Canada’s airlines as long as the vouchers or credits do not expire in an unreasonably short period of time.
“Travel insurers are advising policy holders that if you have been offered this type of full credit, or voucher for future use by an airline, train or other travel provider, in many instances, under the terms of your insurance policy you will not be considered to have suffered an insurable loss,” a news release by the association notes.
The association also notes disputes over refunds and credits should be directed to travel service providers, transportation carriers or the Canadian Transportation Agency.
Airlines already have a fight on their hands, meanwhile, as a proposed class-action lawsuit targeting airlines that only offered vouchers, including Air Canada, Air Transat, West Jet, Sunwing and Swoop, has been filed. The suit claims that the airlines should not be allowed to hold onto customers’ money indefinitely for a purchase that they may or may not make in the future.
The advocacy group Air Passenger Rights says the transportation agency has given the false impression the initial endorsement of vouchers was a legally binding determination.
Source: Delta Optimist
Canadian airports are poised to lose $1.3 billion amid an ongoing global travel collapse triggered by COVID-19, says group representing the country’s airports.
“This is a situation that’s unprecedented,” Canadian Airports Council president Daniel-Robert Gooch said in a phone interview. “Airports are having some conversations now about what their financial futures look like.”
Many major airlines will be operating at half capacity by next month amid border closures and slashed flight schedules, causing fees garnered from carriers and passengers to dry up, Gooch said.
He has asked Transport Minister Marc Garneau for relief on the roughly $380 million in rent that non-profit Canadian airport authorities pay Ottawa each year.
Gooch said support could come as a rent deferral or reduction, that would help offset fixed costs such as runway maintenance.
Airports directly employ about 194,000 workers, some of whom will see their jobs in jeopardy as terminals and check-in counters clear out, he added.
“We know that the airport concessions — food, beverage, retail — they have been hit as well,” he said.
The Canadian Airports Council represents 53 airports, including the country’s three largest that account for the bulk of federal airport rent.
Earlier on Tuesday, the head economist at the International Air Transport Association said revenue losses around the world are already surpassing the trade group’s worst-case projection of US$113 billion and threatening to send multiple airlines into bankruptcy.
Brian Pearce said a recovery from the novel coronavirus pandemic will not come until September at earliest. “The challenge we face today is: Can airlines last that long before they run out of cash?”
On Monday, Prime Minister Justin Trudeau announced Canada will close its borders to most foreign nationals except Americans and bar anyone, including Canadian citizens, with symptoms of the illness from boarding flights to this country.
Air Canada said hours earlier it would halve its seat capacity in the second quarter and withdraw its earnings forecast for 2020 and 2021 amid a “severe drop in traffic” due to the outbreak, which has infected more than 168,000 people and killed at least 6,600, according to the World Health Organization.
The announcement sent company shares into a tailspin, with the stock plunging to $16.23 by midday Tuesday — roughly one-third of its price two months ago.
WestJet announced Monday night it was suspending all commercial operations for international and transborder flights for a 30-day period.
Christopher Reynolds, The Canadian Press