RE:RE:Air CanadaLet's use some numbers as everyone likes numbers.
Right now LEEFF financing from the government is at 8% and Air Canada and the other airlines are balking at the rate saying it's too high. This means if they declare bankruptcy, it would push the capital costs well above 8% in the medium term as if it wouldn't, they would just declare bankruptcy and still not take that loan.
We also know that lease rates for airplanes have dropped, and aircraft value has dropped. However, even with that drop, it's not worthwhile to renege on the CPA/leases as it would push their cost of capital higher than the savings from the lower lease rate or else they would have done it already.
Now if we combine the two, say an optimal situation was to declare reorganization and walk away from all commitments borrow at 8% and get the new leases and CPA at lower terms (as companies are capped at borrowing from the Government of Canada at 8%.) As the 8% is fixed, we can assume that lease or the expected CPA rates actually have dropped by a factor of less than 8% borrow costs - current borrowing costs of 7.4% stated here: https://www.aircanada.com/content/dam/aircanada/portal/documents/PDF/en/quarterly-result/2020/2020_MDA_q3.pdf so 0.6% + whatever medium term damage there would be to their capital cost structure.
So generally speaking, the whatever the drop in lease rate/CPA rates are this is probably known and shown somewhere- 0.6% <= the increase in cost of capital. A quick google search tells me 15%-30% for non widebody airplanes as of July? so take an average 22.5%? -0.6% = 19.9% ? That's a big increase in cost of capital if it's higher than that. No wonder they don't wanna reorganize and walk away. That will eat right into their profits after reorg.
Considering Air Canada had a ROIC of 15.5-16% in 2019 Q4 before the covid 19, it wouldn't make sense to reorganize then give away all their hard earned profit by taking losses like that in the mid term.
Anyways that's my using my logic to think things through.