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More Help for Canada’s Airlines is on the Way After Air Canada’s $5 Billion in Aid

Madhu Unnikrishnan

April 13th, 2021

Since the pandemic began, Canadian carriers have lobbied the federal government to provide aid to the industry, but other than supporting laid-off airline workers through existing unemployment assistance programs, Ottawa has stayed on the sidelines. That changed yesterday, when the federal government extended an $4.7 billion (CAD$5.9 billion) aid package to Air Canada.

The aid package comes from the government’s Large Employer Emergency Financing Facility, a program of the Canada Enterprise Emergency Funding Corporation.

Ottawa’s hesitance to provide support for the country’s airline sector has stood out among developed countries. The U.S., by contrast, has provided $74 billion in airline-industry support through the CARES Act last March and two subsequent coronavirus economic stimulus packages. France, last week, provided additional aid to Air France after it, and most other European countries, extended relief to their airlines last summer.

“Canada’s major airlines are still operating without sector-specific aid and are consequently losing market share to foreign competitors who have received strong sectoral support from their governments,” National Airlines Council of Canada (NACC) President Mike McNaney said in January to press the government to support airlines.

But this could change. The country’s other carriers said they are in talks with the federal government for more aid. Sources close to those discussions have said a broader airline-specific airline bailout could be part of the 2021 federal budget, which Prime Minister Justin Trudeau’s government is expected to deliver to Parliament next week.

As part of the aid package, Air Canada will issue warrants worth up to $399 million of its shares to the Canadian government, which the state can later sell for a profit if the carrier’s fortunes reverse. The Montreal-based carrier reported losses of $3.7 billion last year. Canada’s government could own up to 10 percent of the carrier. Air Canada CEO Michael Rousseau called the aid package “insurance” that that will allow the struggling carrier to recover from the collapse in travel demand.

Air Canada has reduced its workforce by 22,000 employees since the pandemic began. For the most part, those workers are eligible for Canada’s wage support program, separate from airline-specific aid. The new aid package requires Air Canada to keep the 15,000 employees it had on April 1 but it does not require the carrier to recall furloughed workers.

By taking the funds, Air Canada agreed to restore service to more than a dozen cities that it suspended from its route network, and to offer refunds to all travelers who canceled their non-refundable tickets since the pandemic began last year.

Air Canada also has committed to its order for 33 Airbus A220s — formerly Bombardier CSeries jets —manufactured in Mirabel, Quebec. “For our economic recovery and to build back better, we need a strong Canadian air sector that creates good jobs, grows the economy and helps connect communities across Canada,” Transport Minister Omar Alghabra said.

Until now, the federal government had not made it easy for Canada’s struggling airlines. The U.S. border remains largely closed. International traffic has all but evaporated. And in January, the government imposed among the strictest travel restrictions in the world, requiring incoming passengers to present proof of a negative Covid test and also to quarantine, at great expense. At the time, the NACC decried the quarantines and renewed calls for federal aid for the industry.

A WestJet spokesperson said it has operated “self-sufficiently” since the pandemic began, and already has pledged to restore its entire pre-pandemic route network of 42 cities. The Calgary-based carrier is in talks with the government on a safe travel restart but did not specify if it is also seeking an aid package.

Porter Airlines, which has not operated since last March and this week said it will delay its restart until at least June 21, lauded the “strong step” the federal government took with its aid to Air Canada. “We look forward to a broader industry solution being finalized as part of our continuing discussions with the government,” a spokesperson said.

Trudeau’s government is expected to deliver its budget to Parliament on April 19.

Madhu Unnikrishnan

April 13th, 2021

Tags: Air Canada

Photo credit:  Pixabay / Nel_Botha-NZ

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