By David Ljunggren and Allison Lampert
OTTAWA/MONTREAL (Reuters) - Air Canada, struggling with a collapse in traffic due to the COVID-19 pandemic, reached a deal on Monday on a long-awaited aid package with Ottawa that would allow it to access up to C$5.9 billion ($4.69 billion), both sides said.
As part of the package, Air Canada said it would proceed with planned purchases of 33 Airbus SE 220 airliners and 40 Boeing (NYSE:BA) Co 737 MAX airliners.
"This financial support... will help Air Canada weather the current economic downturn and will protect thousands of Canadian jobs," the federal finance ministry said in a statement.
Canada's largest carrier, which last year cut over half its workforce, or 20,000 jobs, and other regional airlines have been negotiating with the Liberal government for many months on a coronavirus aid package.
The federal finance ministry said it was still in negotiations with other airlines about possible aid.
The package consists of a series of debt and equity financing agreements with the Canadian government, the airline said in a statement. Under the terms of the deal, the government will be able to buy C$500 million worth of shares in the airline, a roughly 6% stake.
Michael Rousseau, the airline's president and chief executive officer, said the liquidity "provides a significant layer of insurance for Air Canada."
As part of the deal, Air Canada said it would agree to unspecified restrictions on the issuance of dividends and share buy-backs. Executive compensation will be capped and current employment levels will not fall below the 14,859 people now working for the airline.
Air Canada can borrow C$1.5 billion in the form of a secured revolving credit facility at a 1.5% premium to the Canadian Dollar Offered Rate and a further C$2.475 billion in the form of three unsecured non-revolving credit facilities of C$825 million each, it said.
Air Canada and rival WestJet had pleaded for help for months as demand plummeted. Ottawa resisted, demanding the airlines restore some of the regional routes they had cut and promise to refund passengers who could not take flights they had booked.
Rousseau said the aid package would help the carrier "better resolve customer refunds of non-refundable tickets, maintain our workforce and re-enter regional markets."