TRANSPORTATION REPORTER
Groupe Aeroplan Inc. AER-T and Air Canada's parent are part of financing talks that could see them take part in a group that would lend $600-million to the cash-strapped airline.
Aeroplan, formerly a division of Air Canada, and ACE Aviation Holdings Inc. ACE.A-T, the airline's 75-per-cent owner, may be willing to join the lending syndicate that will likely include a federal agency and private lenders, industry officials said yesterday.
ACE chairman Robert Milton is known to want to assist Air Canada with a potential loan. He recently acquired a block of 784,350 ACE class B voting shares, boosting his total to 808,686 shares as he manoeuvres to influence decisions on what to do with ACE's cash reserves, an insider said.
ACE, which holds its annual meeting June 26 in Montreal, could step up with $150-million in loans and Aeroplan would have the resources to chip in another $100-million, but the amounts remain speculative and could fluctuate widely, the insider said.
The expectation in Ottawa is that Air Canada would seek $200-million in loans from Export Development Canada (EDC). The remaining $150-million in loans being sought by the carrier may be spread across several lenders.
Air Canada is holding talks with EDC about borrowing on commercial terms, Finance Minister Jim Flaherty confirmed yesterday, adding that management and unions have made great strides on forming a plan to defer company pension payments. "They have come to an agreement on what they would ask the government to do, which would be a moratorium for a period of time on recapitalizing fully the pension plan," Mr. Flaherty said.
Air Canada needs the loans to help survive the recession, which has weakened travel demand and reduced revenue, while facing rising fuel bills.
The airline has nearly $1-billion in equity in nine Boeing 777 wide-body planes, 60 Embraer narrow-body jets and other assets that could be used to backstop the loans.
"Air Canada has substantial amounts of unencumbered collateral that it would provide as security to lenders. There's a robust market for doing this type of financing, on the assumption there won't be a filing for bankruptcy protection," one industry official said.
Air Canada management reached a pension deal with its pilots and flight attendants on Monday night that clears the way for the company and its unions to ask Ottawa for a 21-month pension funding moratorium, before resuming payments of $150-million in 2011, $175-million in 2012 and $225-million in 2013.
Captain Andy Wilson, president of the Air Canada Pilots Association, said the pension pact "is a major step, but there still is a ways to go."
With a file from reporter Kevin Carmichael in Ottawa
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