Air Canada Announces Lease Restructuring

MONTREAL, July 3 /CNW Telbec/ - Air Canada announced today that it has
reached a tentative agreement with General Electric Capital Aviation Services
(GECAS) on the restructuring of all GECAS financed and managed aircraft as
well as on new exit and aircraft financing totaling approximately
CDN $1.8 billion.
“This agreement with GECAS constitutes a major statement of confidence
and a solid endorsement from a global business leader on the significant
progress we are making and the strategic direction we are taking with Air
Canada`s overall restructuring plan,” said Robert Milton, President and Chief
Executive Officer. “I am extremely pleased by the speed with which we have
reached a comprehensive agreement with our biggest financial provider that not
only addresses current aircraft obligations but also provides significant
additional exit financing and endorses our restructured fleet plan.
“This agreement builds on the substantial progress made to date in a very
complex process and advances us considerably towards our goal of restructuring
Air Canada into a stronger airline that is well positioned to compete
profitably in the new industry environment,” said Mr. Milton.
The restructuring of the GECAS aircraft leases involves a combination of
lease rate reductions, lease payment deferrals, early lease terminations and
the cancellation of future aircraft delivery commitments. The agreement
encompasses 106 Air Canada and Air Canada Jazz aircraft including operating,
parked and undelivered aircraft. It also includes leases on certain of the
106 aircraft that were cross-collateralized under the terms of the debtor-in-
possession (DIP) financing of US $700 million announced April 1, 2003.
As part of the tentative agreement, GECAS has agreed to extend to Air
Canada as debt financing for emergence from the Companies` Creditor
Arrangement Act (CCAA) a secured loan of US $425 million (approximately
CDN $575 million) to be secured by a fixed and floating charge over the
unencumbered assets of Air Canada. This will largely constitute the same
collateral pool against which its current DIP financing is secured. This new
loan would come into effect upon Air Canada`s exit from CCAA) proceedings and
would be used for general corporate purposes to improve the Company`s cash
position. The loan would also form an important portion of the Company`s
previously announced exit debt and equity financing requirements of
approximately CDN $1.35 billion.
GECAS has also agreed to provide a maximum of approximately
US $950 (CDN $1.285 billion) to finance up to 43 regional aircraft, for which
financing is expected to occur through a series of transactions. This regional
aircraft financing is subject to, among other things, maintaining a specified
credit rating following Air Canada`s emergence from CCAA.
As part of this tentative agreement, Air Canada has agreed that it will
immediately recommence payment of aircraft rent to GECAS.
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