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An Air Transat sign stands at Terminal 3 at Toronto Pearson International Airport on March 19, 2020.Fred Lum/the Globe and Mail

Airline and tour operator Transat A.T. Inc. said it needs more cash to survive the pandemic that hammered demand for air travel, but its ability to borrow is restricted by wording in the stalled Air Canada takeover deal.

Executives with Transat said on Thursday they are in “advanced discussions” to obtain financing, declining to provide details, and reissued a call for government bailouts to bolster its cash reserves of $576-million.

Jean-Marc Eustache, chief executive of Transat, said on a conference call with analysts that he is “really frustrated” at the lack of any airline- or travel-industry aid package from federal and provincial governments.

“We don’t understand,” he said. “We are all crying, talking to every [cabinet] minister that we know. They all say, ‘Yes, yes, we are going to help you one day.’ And we don’t hear [from] them anymore,” said Mr. Eustache, who also complained that Canada’s travel quarantines and closed borders are slowing any recovery in travel demand.

“Nobody is helping this industry and … we are suffering like crazy,” he said.

Transat outlined measures it has taken to reduce costs and preserve its bank balance, including cutting its work force; refusing to give customers refunds for cancelled flights; using credit worth $50-million; renegotiating with suppliers; and retiring its Airbus 310 fleet. Transat recalled 1,000 employees as it restarted flights in July after a four-month shutdown. However, two-thirds of its 5,200 workers are at home on government wage subsidies. Mr. Eustache said he expects at least 2,000 employees will be laid off permanently.

The COVID-19 pandemic caused a worldwide collapse in demand for air travel and spurred governments to close borders, issue stay-home orders and impose travel quarantines. Mr. Eustache said it could be several years before people begin flying again at 2019 levels. “Nobody knows,” he said.

In the third quarter, Transat burned through $157-million on fixed costs that include salaries and aircraft rent, in addition to the settling of hedging contracts.

Benoît Poirier, a stock analyst at Desjardins Securities, said Transat’s attempts to save cash are not working as expected. Excluding customer deposits and deferred revenue, Transat has $219-million in cash, less than the $489-million Mr. Poirier expected.

Still, the company said it needs to raise more money, and it is not clear Air Canada will permit it to do so.

“The covenants undertaken under the arrangement agreement with Air Canada restrict and govern the corporation’s capacity to obtain additional sources of financing and may require Air Canada’s prior consent,” Transat said on Thursday in a statement releasing its third-quarter financial results. “Although the agreement provides that Air Canada’s consent may not be unreasonably withheld, there is no certainty that Air Canada will consent to the obtaining of additional sources of financing by the corporation.”

Transat shareholders in August, 2019, approved Air Canada’s $720-million takeover, worth $18 a share. Transat shares traded at just over $5 on Thursday on the Toronto Stock Exchange.

The deal is awaiting regulatory approvals in Canada and Europe. Transat said it expects a decision by Dec. 11 from the European Commission. There is no deadline on the Canadian ruling, which will follow a Competition Bureau report from March that said the merger would limit customer choices.

The takeover agreement sets out several restrictions on how Transat operates while awaiting approvals. The agreement covers indebtedness, accounting procedures and Transat’s negotiations and relationships with lessors and suppliers.

“During this time, our purchase agreement with Transat remains in effect,” said Peter Fitzpatrick, an Air Canada spokesman, declining to comment further until the regulatory reviews are completed.

Transat has exercised its option to extend the deal’s deadline three times while awaiting approvals. The deal is off by Dec. 27 without government approvals, unless the companies agree to an extension.

In the three months ending July 31, a period in which the airline was grounded for all but the final nine days. revenue fell to $9.5-million, from $700-million in the same quarter of 2019. Excluding non-operating items, Transat said it lost an adjusted $139-million, or $3.70 a share, compared with a profit of $6.2-million (16 cents) in the third quarter of 2019.

Transat halted flights on March 23 and resumed flying on July 23. On 17 weekly destinations, Transat said its six Airbus A321 planes flew at 58-per-cent and 53-per-cent capacity in July and August, respectively. This is better than the global industry average, which ranges from 34 per cent to 46 per cent, said Annick Guérard, chief operating officer.

The federal government has subsidized wages, provided rent relief to airports and offered to back loans to large employers, said Livia Belcea, a Transport Canada spokeswoman.

“During this recovery phase, there are ongoing discussions with airports, airlines and those in the sector affected by the pandemic,” she said in an e-mail. “Unfortunately, I don’t have additional information at this time, but can confirm that Minister [Marc] Garneau continues to focus on this issue and is seized with the impact COVID-19 is having on the sector.”

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