Air Transat Bailed Out By The Canadian Government

Air Canada’s purchase of its competitor, Transat, fell apart after the airline failed to get approval from the European Union (read more here). Then the country’s flag carrier got a C$5.9B bailout from Ottawa.

Air Transat

Now, it is Transat’s turn to get bailed out by the government to the tune of C$700M, of which half is used to refund passengers whose flights the airline canceled, but has refused to provide refunds, exactly how Air Canada was acting dealing with the government (no bailout = no refunds).

You can access the Air Transat refund page here.

Note that you must request your cashback by August 26, 2021. It may take up to three months to process the refund by the airline.

Here’s the announcement from the Air Transat:

Transat secures $700 million in funding from the Government of Canada

Refund process of trips cancelled due to the pandemic to begin immediately

MONTRÉAL, April 29, 2021 /CNW Telbec/ –  Transat A.T. Inc. (“Transat” or the “Corporation”) announced today that it has reached an agreement with the Government of Canada to borrow up to $700 million in additional liquidity through the Large Employer Emergency Financing Facility (LEEFF).

“The agreement reached with the Government of Canada provides us with an additional $700 million in liquidity, which is the amount we needed to move forward with confidence. Our strong balance sheet prior to the pandemic and the aggressive actions we have taken since have enabled us to weather this unprecedented crisis so far. With this support, we now look forward to resuming operations as soon as safe travel is possible and travel restrictions can be lifted. We will then be able to implement our plan to make Transat a solid and profitable company once again, one that will continue to symbolize leisure travel for its many customers in Quebec and elsewhere,” declared Jean-Marc Eustache, President and Chief Executive Officer.

“The funds obtained will also enable us to reimburse our customers whose travel had to be cancelled due to the pandemic under conditions that are sustainable for the company, which we welcome.”

The new fully repayable credit facilities made available by the Canada Enterprise Emergency Funding Corporation under the Large Employer Emergency Financing Facility, which Transat would use only on an as-needed basis, are as follows:

  • An amount of $390 million, representing the liquidity needed to support Transat until its business has recovered to a level where it can generate cash once again, broken down as follows:
    • An amount of $78 million in the form of a non-revolving and secured credit facility bearing interest at CDOR (Canadian Dollar Offered Rate) plus 4.5% and maturing in 2 years; the facility is secured by a first-ranking charge on the assets of Transat A.T. Inc.
    • A $312 million non-revolving and unsecured credit facility with a 5-year maturity, loaned at a rate of 5% in the first year, increasing to 8% in the second year, and by 2% per annum thereafter, with the possibility of capitalization of interest in the first two years.
    • In the context of the financing arrangement, Transat issued a total of 13,000,000 warrants for the purchase of an equivalent number of shares of Transat (subject to certain limitations described below), with customary adjustment provisions, at an exercise price of $4.50 per share (representing the volume-weighted average trading price for the five trading days preceding the issuance of the warrants) over a 10-year period, representing 18.75% of the total commitment available under the above non-revolving and unsecured credit facility. The warrants are to vest in proportion to the drawings that will be made, and 50% would be forfeited if the loan were to be repaid in full in the first year.
  • An amount of $310 million consisting of an unsecured credit facility to provide reimbursement to travelers who were scheduled to depart on or after February 1, 2020, for whom a travel credit was issued as a result of COVID–19. This amount is repayable over a 7-year term and is loaned at the current 7-year Canada Bond rate of 1.2%.

The number of shares issuable upon exercise of the warrants may not exceed 25% of the current number of issued and outstanding shares, nor may it result in the holder owning 20% or more of the outstanding shares upon exercise of the warrants. In the event of an exercise of warrants that surpasses these thresholds, the excess will be payable in cash on the basis of the difference between the market price of Transat’s shares and the exercise price. Finally, in the event that the credit facility is repaid in full by its maturity, Transat will have the right to redeem all of the warrants for a consideration equal to their fair market value. The warrants will not be transferable prior to the expiry of the period giving rise to the exercise of such redemption right. In addition, the holder of the warrants will benefit from registration rights to facilitate the sale of the underlying shares and the warrants themselves (once the transfer restriction has been lifted).

In connection with the establishment of these credit facilities, Transat has made certain commitments, including:

  • The reimbursement of travelers who were scheduled to depart on or after February 1, 2020, to whom a travel credit has been issued due to COVID-19. Refunds will begin immediately, with terms to be communicated separately. As per the agreement, to be eligible, customers will need to expressly indicate their desire for a refund;
  • Restrictions on dividends, stock repurchases and executive compensation;
  • Maintaining active employment at the level of April 28, 2021.

In addition to the new funding, the amounts already drawn on the existing facilities will remain in place and will be extended for a period of two years from the implementation of the new financing. The ratios applicable to the existing facilities will be suspended for a period of 18 months. The undrawn credit under the short-term subordinated facility will be cancelled.

In total, the available financing will therefore represent a maximum of $820 million. This includes the newly issued LEEFF funding, as well as existing funding of $120 million divided into $50 million under the secured revolving credit facility with National Bank of Canada and the Bank of Nova Scotia and $70 million under the subordinated credit facility with National Bank of Canada and Export Development Canada.

If all of the available facilities were to be used, it would be at an average rate of approximately 6%, plus the warrants.

Here’s about the refunds:

Transat offers refunds for travel credits issued due to COVID-19

MONTREAL, April 29, 2021 /CNW Telbec/ – Transat is pleased to announce that a funding agreement with the Canada Enterprise Emergency Funding Corporation (CEEFC) now allows it to offer refunds to travellers who were issued a travel credit due to COVID-19 for a trip scheduled to start on or after February 1, 2020. This policy applies to flights and packages booked by April 29, 2021. Going forward, should Transat make changes to its flight program, affected customers would also be eligible for a refund.

“We’ve been impatiently waiting for this moment, and we know our customers have been, too,” says Annick Guérard, Chief Operating Officer of Transat. “Now that a funding agreement has been reached and the eligibility criteria have been established by the Government of Canada, we are delighted to be able to provide our customers with this long-awaited aid.”

Among the parameters set by government authorities, those who have a travel credit must submit their refund request to Transat by August 26, 2021. This is why they are invited to complete the request form available at airtransat.com/refunds as soon as possible. If they originally booked with a travel agent or online travel agency, they should contact them directly.

“Travel agents have shown unwavering resilience and support since the crisis began,” adds Guérard. “That’s why we’re pleased to confirm that commissions earned by agents will not be recalled if their customers opt for a refund.”

Customers and travel agents are invited to visit airtransat.com/refunds to consult our frequently asked questions or learn about the refund eligibility

Here’s how the Air Transat & Air Canada deal fell apart:

Air Canada & Air Transat Deal Called Off

How Ottawa bailed out Air Canada:

Canadian Government Bails Out Air Canada

Air Canada Now Refunding Non-refundable Fares (Submit By June 12, 2021)

Conclusion

It is atrocious how the airlines of Canada have dealt with customer refunds, essentially blackmailing the country’s government – no bailouts = no refunds.

All these airlines were forced to refunds passengers whose flights were to/from Europe or to/from/via the United States per the European Union laws and US DOT’s guidance.

I entirely haven’t understood how the Canadian regulator has taken such a lax approach towards the airlines and refunds? If they weren’t providing the service, why would they be allowed NOT to refund passengers?

It is good, though, that Air Canada doesn’t become a monopoly on direct flights from Canada and flights within. You could only imagine what they might try to charge? The competition is good.

Here are the frequently asked questions by Air Transat:

Frequently Asked Questions (FAQ)

  • Yes, you must submit your request using the online form by August 26, 2021, 11:59 p.m.

  • If you don’t submit your request by August 26, 2021, 11:59 p.m., you will not get a refund. The travel credit will remain on file with the same conditions and will be available when you are ready to make a new booking.

  • Due to the exceptionally high volume of requests, processing times may take up to three months. Requests will be treated in the order in which they are received. Rest assured that all our resources are dedicated to responding to your request as quickly as possible.

    Please note that your refund may be processed in several stages. For example, you could receive a refund for the flight or package and another for ancillary services (seat selection, luggage, Option Plus, etc.).

  • Once your request is processed, a refund will be issued in the method of payment on file and a confirmation will be sent to you. If you originally booked with a travel agency, the confirmation will be sent to them.

  • No, unfortunately, we cannot use your initial request. The process and eligibility criteria were put in place as part of the funding agreement between Transat and the Government of Canada. Thus, among the parameters set by government authorities, those who have a travel credit must submit their refund request to Transat by August 26, 2021, 11:59 p.m..

  • You simply need to contact the travel agency so they can submit a refund request on your behalf to our team.

  • If you can’t reach your travel agency or they’re closed, we’re here to help. Simply fill out a refund analysis form and submit it to us by August 26, 2021, 11:59 p.m.

  • Simply submit a refund request using the online form by August 26, 2021, 11:59 p.m. If the credit card used at the time of purchase is no longer valid, we will contact you when issuing the refund. If you originally booked with a travel agency, we will contact the agency.

  • No, because the chargeback process cannot be interrupted. Therefore, bookings that are subject to an active chargeback claim or that have already been charged back are not eligible for a refund.

  • No, if you’ve already been compensated by an insurance company, you are not eligible for a refund.

  • Yes, you are eligible for a refund. To receive it, you must contact our Contact Centre at least 24 hours before your scheduled departure. An agent will cancel your booking and submit a refund request on your behalf. If you originally booked with a travel agency, simply contact them.

  • Yes, you are eligible to receive a refund for the remaining travel credit. Simply submit your request using the online form by August 26, 2021, 11:59 p.m.

  • Yes, you are eligible for a refund. Simply contact your travel agency so they can submit a refund request on your behalf to our team. If you originally booked with Transat, contact your group leader, who will then reach out to our team.

  • Yes, you are eligible to receive a refund for the travel credit but for the air portion only. Simply submit your request using the online form by August 26, 2021, 11:59 p.m.

    The cruise portion is subject to the terms and conditions of the cruise line and may not be eligible for a refund. If you have any questions, please do not hesitate to contact us.

  • Yes, you are eligible for a refund. Simply submit your request using the online form by August 26, 2021, 11:59 p.m.

  • No, bookings that have already been reimbursed are not eligible for a refund.

  • To find out if you’re eligible for a refund, simply fill out a refund analysis form and submit it to us by August 26, 2021, 11:59 p.m.

  • No, deposits are not eligible for a refund when the booking is cancelled by the client.

  • If you want to keep your travel credit, no action is required on your part. The credit will remain on your file with the same conditions and will be available when you are ready to make a new booking.

  • No, because a travel credit cannot be split up. You can choose to keep the entire credit on file with the same conditions, or you can get a full refund by submitting your request using the online form by August 26, 2021, 11:59 p.m.

  • No, because the refund can only be made using the method of payment on file. Unfortunately, a transferred travel credit cannot be refunded.

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