Air Canada reports C$1.7 billion of liquidity, cuts debt by C$150 million in three months

By Lisa Kerner

Charlotte, N.C., June 10 - Air Canada is committed to improving its balance sheet, implementing a C$50 million cost reduction program in the short term and maintaining its liquidity goal of more than C$1.7 billion.

Executives outlined the balance sheet improvements as well as plans to pursue additional improvement in the company's profitability and shareholder value at Air Canada's 2013 investor day on Monday in Toronto.

New financing opportunities include a trust certificate offering with a combined value of US$715 million and blended coupon of 4.7% as well as more favorable alternatives for funding aircraft deliveries.

Air Canada is also targeting to maintain its existing adjusted net debt/trailing 12-month normalized EBITDAR leverage ratio below 3.5 for 2013 and over the medium term. The figure was at 3.1 times for 2012, down from a high of eight times in 2009.

Pension plan changes are expected to permanently reduce solvency liabilities of about C$1.1 billion by 2020.

According to the presentation, Air Canada has doubled its liquidity and reduced net debt by almost C$1.5 billion since 2009. Net debt was reduced by C$150 million in the first three months of 2013.

The Montreal-based commercial airline posted an annual profit in 2012, its first since 2007. Adjusted net income for the year was C$55 million compared to a net loss in 2011. Air Canada's share price increased 76% during 2012.

"We have confidence our financial plan can earn a return on invested capital that exceeds its weighted average cost of capital and reward shareholders far into the future," said president and chief executive officer Calin Rovinescu in the presentation news release.

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