Air Canada will have 'breathing room' after raising $1 billion, president and CEO Calin Rovinescu said. (Darryl Dyck/Canadian Press)The federal government, one of its agencies and companies linked to Air Canada are among the lenders supporting the airline with up to $1 billion in credit, the parties announced Wednesday.

The loans complete the third leg of a restructuring program the airline undertook to survive through the recession.

However, the money won't come cheap; up to $700 million of it will have a minimum of 12.75 per cent interest.

"The $1 billion of new liquidity will give us breathing room towards achieving sustainable profitability" amid massive losses in the airline business, said Calin Rovinescu, president and CEO.

The money was part of a turnaround plan that included raising $600 million, extracting concessions from the airline's unions and convincing the federal government to allow the company to delay pension payments.

"With these financings and other transactions, the pension funding moratorium and new pension deficit funding arrangements, as well as the 21-month extensions to our collective agreements on a cost-neutral basis, we have strengthened our position," Rovinescu said.

Among a whole series of initiatives announced Wednesday, Air Canada said it has:

• Arranged a credit agreement giving it up to $700 million, with $600 million available initially. "Amounts drawn under the credit agreement bear interest at a minimum annual rate of 12.75 per cent."
• Reached a deal with a supplier giving the airline about $220 million "in consideration of various contractual commitments."
• Arranged a sale-leaseback for three Boeing 777-300ER planes, giving it $122 million.
• Extended the repayment date of an $82 million loan to December 2013 from December 2009.
• Repaid $117 million under various credit agreements.

Export Development Canada, a federal agency, has provided $150 million under the credit agreement, and the federal government is lending $100 million through its Canada Account.

Access to new financing will keep Air Canada flying through the recession, the airline hopes. (AdrianWyld/Canadian Press)ACE Aviation Holdings Inc., Air Canada's parent company, is lending $150 million.

Aeroplan, the loyalty points business spun out of Air Canada, is providing $150 million.

GE Canada Finance Holding Co. was also named as a member of the lending group.

Air Canada said that under the credit agreement, the airline will give lenders warrants to buy up to five per cent of Air Canada shares.

ACE had said last year that it planned to undergo a liquidation, but market conditions and opposition by certain shareholders led it to initially postpone a shareholder vote on the plan.

"Given ACE's participation in Air Canada's credit facility, it is unlikely that ACE will pursue a liquidation in the near term," the company said.