Canada Is Preparing An Airline Bailout Package

Simple Flying

By Linnea Ahlgren

Published Oct 23, 2020

TORONTO, ON- AUGUST 14 - Things are slow at the airport. Parkn Fly lots around Pearson International Airport are showing the effects of reduction of national and international travel. Toronto is in phase three of reopening along with other parts of Ontario as the province tries to slow the spread of COVID-19 in Toronto. August 14, 2020. (Steve Russell/Toronto Star via Getty Images)

Canada's federal cabinet is reportedly preparing a sector-specific airline rescue package. The bailout will consist of low-interest loans, a rollback of airport fees, and potentially a payroll support scheme, sources said Friday.

On Friday, reports came in on how Canada's federal cabinet is readying an airline bailout package. After the US Congress and the Presidential Administration failed to reach a resolution in time, resulting in thousands of jobs lost, will its northern neighbor fare any better?

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Not without conditions

According to the Globe and Mail, the targeted rescue package will include low-interest loans, along with a rollback of airport fees. The loans are likely to come through the Business Development Bank of Canada or the Export Development Corporation. The cabinet is also reportedly considering a sector-specific payroll support scheme.

Sources say that the government plans to make the funds available on certain conditions. Firstly, airlines may not use money from the state-support package to pay their executives. Secondly, carriers may be requested to restart services to key regional connections that have been discontinued since the start of the pandemic.

WestJet Air Canada — People arriving in Atlantic Canada from outside the region have to self-isolate for 14 days. Photo: Getty Images

Potential nationalization?

In an interview earlier this week, Intergovernmental Affairs Minister Dominic Leblanc also did not exclude that the government could take a stake in the country's major airlines. In fact, the Canadian branch of the International Association of Machinists and Aerospace Workers has even urged the government to nationalize Air Canada.

Airports across the country have raised their fees in the past few months. Toronto's Pearson has increased its fees by 20%. The Winnipeg Airports Authority hiked its fees by as much as 50%. So it is understandable that a government-mandated cut to airport fees could make a substantial difference.

Canadian aviation also continues to suffer greatly from the country's uncompromising travel restrictions. Even domestically, airlines have canceled routes and connections, much because of the "Atlantic bubble." Air Canada has canceled 30 domestic routes, and WestJet recently cut 80% of its traffic to Atlantic Canada.

B737, Air Canada — The government does not exclude taking a stake in some airlines. Photo: Getty Images

Wage subsidies only support thus far

The industry has been lobbying the government for support for months, but all pleas have thus far fallen on deaf ears. While Canadian airlines have received indirect support of C$1 billion ($763 million) in the form of wage subsidies, there has been no sector-specific relief.

At a press conference this Tuesday, Canada's Finance Minister, Chrystia Freeland, said she had spoken to the heads of Canada's major airlines and unions but did not give any further details.

“We are obviously aware of the particular challenges that the travel sector, the airlines are facing right now,” she told reporters, according to Reuters. “It’s definitely an issue we are looking at closely and working on.”

Despite the, to say the least, trying times, Air Canada recently announced it would be going ahead with the acquisition of Canada's third-largest airline, Air Transat.