Air Canada and the Canadian federal government have agreed upon a liquidity package for the airline of $4.7 billion. 

Importantly, as part of the deal Air Canada will offer refunds to customers who purchased nonrefundable fares since February 2020 but did not travel. In addition, the carrier will not retract travel agency commissions on those refunded fares. 

Under the financing agreement, Canada will take a $399 million stake in Air Canada, purchasing shares at a price of $18.48, a discount on the stock's Monday closing price of $21.53. The federal government also holds warrants exercisable for the purchase of an additional 14.58 million Air Canada shares at $21.74. 

Canada will loan Air Canada up to $4.3 billion, with up to $1.12 billion directed specifically toward customer refunds.

As part of the loan package, Air Canada has also agreed to resume flying to regional communities that it had stopped serving during the pandemic. The carrier will also maintain employment at least at its April 1 level and has accepted restrictions on share buybacks, awarding dividends and senior executive compensation. 

Air Canada has been hit hard by the pandemic. Challenges have been exacerbated by strong travel restrictions put in place by the Canadian government. The carrier reported a net loss of $3.71 billion in 2020. Operating revenue was down 70%. 

Air Canada has drawn the ire of consumers, travel agencies and ASTA during the pandemic for defining all Covid-19-related flight cancellations as outside its control and therefore not subject to refunds for those who don't hold a refundable ticket. The policy has also been in conflict with DOT requirements for flights that touch the U.S. 

In January, the most recent month for which the DOT has released complaint data, the agency received 170 refund-related complaints against Air Canada, the second most it received for any airline. TAP Air Portugal drew the most complaints, with 315.

CORRECTED: This report was updated on April 14 to correct the amount the Canadian government plans to loan Air Canada.

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