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Banking industry

Air Canada Secures Deal with Deutsche Bank to Shore Up Operations

Strategic Insights

— 1 min read

Air Canada has taken a major step in its financial recovery by reaching a deal with Deutsche Bank AG to fill the investment gap left by Hong Kong investor Victor Li. The airline will raise $850-million through a guaranteed rights offering, with Deutsche Bank taking up any unclaimed shares. This deal is expected to provide a solid foundation for Air Canada's restructuring efforts under bankruptcy protection. The airline's president and CEO, Robert Milton, welcomed the agreement, stating that it regains momentum for the airline's restructuring plan. The deal may face some opposition from the airline's unions, however, as it requires new concessions from employees and compromises on labor disputes.

Key Takeaways:

  • Air Canada has secured a deal with Deutsche Bank AG to raise $850-million through a guaranteed rights offering.
  • The airline will no longer need to rely on the proposed $650-million investment from Victor Li.
  • Deutsche Bank has agreed to take up any shares not acquired by other creditors.
  • The deal is subject to various conditions and needs court approval.
  • Air Canada is seeking an additional $250-million from another investor to replace Victor Li.
  • Employees will need to agree to further labor cost savings of $200-million annually.
  • The airline's union agreements with employees will require concessions on material disputes and claims.
  • The pension plan changes, previously negotiated by Victor Li, have been dropped in favor of a Feb. 18 agreement with employees and pensioners.
  • Air Canada has approximately $1-billion in cash on hand and $500-million in available credit lines.

Statistics:

  • $850-million: Amount raised through the guaranteed rights offering.
  • $650-million: Proposed investment from Victor Li.
  • $250-million: Amount Air Canada is seeking from another investor to replace Victor Li.
  • $200-million: Additional labor cost savings employees will need to agree to.
  • $1-billion: Amount in cash on hand as of the close of business last week.
  • $500-million: Available credit lines unchanged from the most recent update.
  • Feb. 18: Date of the agreement between Air Canada, employees, and pensioners regarding pension plans.

Sources:

  • The Globe and Mail, "Air Canada boosts cash flow with Deutsche Bank deal"
  • Report on Business, "Air Canada"

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