Air Canada’s shares soared after the deal gave investors some comfort it’ll survive. Shares rose more than 23%, gaining 38 cents, to close at $2 on the Toronto Stock Exchange.
While the funding alleviates concerns that the troubled carrier will have to file for bankruptcy protection for at least 24 months, it also adds $76 million a year in additional interest expenses.
Despite the challenges of securing funding without the banks, it now faces the task of reducing costs and generating positive cash flows.
Analyst Chris Murray of CIBC World Markets said if Air Canada is going to be sustainable as a business, it’s got to make money flying people and planes. “I think you’ll start seeing fares move higher and part of that is an increase in demand,” he said.
After assuming the helm in April, CEO Calin Rovinescu said he hoped to ride the wave of an economic recovery after addressing pension costs, labour stability and capital funding.
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