Canada's Sunwing Airlines has locked in a CA$375 million government loan as it battles both the COVID-19 fuelled travel downturn and tough travel restrictions at home. The loan is facilitated via a Canadian Government emergency funding facility. Sunwing Airlines becomes the first airline in Canada to receive direct financial assistance from the Canadian Government.
Canada's Enterprise Emergency Funding Corporation is providing the loan via the Large Employer Emergency Financing Facility (LEEFF). The cash is going to Sunwing Airlines primarily to protect the jobs of its 3,000 employees. As part of the deal, Sunwing Airlines must sustain its domestic operations, make reasonable commercial efforts to minimize the loss of jobs and demonstrate a clear plan to return to financial stability.
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A tough operating environment for Sunwing Airlines
Sunwing Airlines and its offshoot, Sunwing Vacations' core business is flying Canadians to holiday destinations in Florida, the Caribbean, Mexico, Cuba, and Central America. That's in addition to flying around a handful of domestic destinations within Canada. Normally, Sunwing Airlines does brisk business flying Canadians south for their holidays. But COVID-19 has put the brakes on that.
By mid-March, the airline had temporarily suspended southbound flights and swung its attention to repatriating stranded travelers. Over one week in March, Sunwing Airlines repatriated 60,000 travelers, including thousands of non-Sunwing customers. Many of those flew free of charge.
Since then, Sunwing Airlines has struggled to get back to business. Canada's tough border and travel restrictions haven't helped. For months, Canada has limited who can enter the country and imposed tough quarantine conditions on those who did arrive. The Canadian Government currently advises Canadian citizens and permanent residents to avoid all non-essential travel outside of Canada.
Canada's Government beefs up border rules and travel restrictions
The Canadian Government doubled down last week. Now, international flights can only arrive and depart from one of four airports; Vancouver, Toronto, Calgary, or Montreal. Borrowing from other countries, all travelers must take a polymerase chain reaction (PCR) test upon arrival then quarantine in a hotel (at their own expense) until a negative result comes back.
Also on the Canadian Government's radar were flights to destinations in Mexico and around the Caribbean. Sunwing Airlines and other Canadian airlines have agreed to suspend flights to these destinations until April in an attempt to keep certain COVID-19 strains out of Canada.
It makes for a tough operating environment for any airline. However, competitors like Air Canada and WestJet have far stronger domestic networks than Sunwing Airlines. Sunwing's core business is the flights south to sunny holiday destinations. The Canadian Government and COVID-19 has effectively closed them down.
Sunwing Airlines the first airline in Canada to receive Government financial assistance
Consequently, Sunwing Airlines has become the first airline in Canada to receive direct financial assistance from the government since the onset of COVID-19. Talks about aviation sector assistance have gone on for months, but the recent beefing up of border rules and travel restrictions may have brought these talks to a head.
Just days after Canada announced its new rules, the Enterprise Emergency Funding Corporation announced the Sunwing loan. In a statement, the Enterprise Emergency Funding Corporation said;
"LEEFF loans provide bridge financing to Canada's largest employers whose needs during the pandemic are not being met through private market financing. It provides large Canadian employers with access to credit to preserve jobs and continue operations during this challenging period."
What do you think? Do you agree with this bailout? Should Canada's Government help the aviation industry more? Post a comment and let us know.