The Canadian government is to step up with some direct financial support for its homegrown airlines. On the weekend, authorities announced the imminent start of relief talks with Canada's airlines. However, there is a catch - the carriers have to get their act together concerning passenger refunds before the government opens its checkbook.

"Before we spend one penny of taxpayer money on airlines, we will ensure Canadians get their refunds," said Canada's Transport Minister Marc Garneau in a statement on Sunday.

Minister Garneau to push on refunds

Many of Canada's airlines, including Air Canada and WestJet, have declined to pay out refunds to passengers whose flights were canceled this year. That hardline position has seen airlines threatened with lawsuits and considerable adverse publicity.

However, late in October, after months of wrangling, Calgary-based WestJet said it would start refunding passengers whose flights had been canceled in 2020. The airline admitted it had failed to deliver on its customer-centric mantra.

"You’re looking for a refund, and we get it," wrote WestJet CEO, Edward Sims last month.

At the same time, WestJet boasted it was the first airline in Canada to begin offering refunds "proactively."

WestJet comes to the party while Air Canada continues to stall on refunds

WestJet's decision to begin processing refunds for all passengers impacted by canceled flights, regardless of fare type, put some pressure on rival Air Canada. That airline said it had been offering refunds all along. That's true to a point. Air Canada had been processing refunds for passengers left in the lurch who held refundable tickets.

The airline said in October it had processed CA$1.2 billion in refunds. But passengers holding non-refundable tickets on canceled flights were left out in the cold. This was despite those passengers been legally entitled to a refund under Canadian law.

It's that decision to ignore legal obligations that has riled Canadians and their Government.

"Canadians who had already booked travel ended up stuck with vouchers for trips they could not take instead of getting refunds.  They found themselves in a situation where they have given thousands of dollars in interest-free loans to airlines," said Minister Garneau.

Canadian Government recognizes airlines industry needs help

The Canadian government walks a fine line between pushing their airlines to do the right thing and pushing them over the edge. Passenger demand is down, routes are suspended, aircraft are parked, and revenue is way down.

"The pandemic has hit the air sector harder than any other, and it is facing a delayed and slow recovery," added Minister Garneau

To date, Canada has been an outlier among western countries when it comes to its airline industry. While Canada's airlines have used Canada's Emergency Wage Subsidy (CEWS), the government has not provided any direct assistance to its airline industry. Contrast this with the loans made available to US airlines under CARES Act provisions and the state aid made available to many European airlines.

According to Marc Garneau, Canada's airlines can no longer be expected to deal with 2020 themselves. While saying there would be public interest tests, Minister Garneau has flagged the possibility of loans and other forms of assistance. It won't just be target airlines.

The nation's airports and aerospace industry also look set to benefit. The minister says over 100,000 Canadians are employed in sectors that revolve around the airline industry. He says a strong and vibrant airline industry in the country is essential not just for the airlines but also for Canada.

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