As travel demand remains low, Canadian airlines are still struggling to cope financially. The Canadian government is yet to provide sector-specific support. Now, the Intergovernmental Affairs Minister Dominic Leblanc confirmed in an interview that the Canadian government is looking at several options to help save its airlines. Here’s what you need to know.
Specific support for airlines
So far, Canada has responded slightly differently to other nations when it comes to supporting airlines. The government has implemented several overarching measures, including a federal wage subsidy and emergency business loans. However, so far, it hasn’t provided any specific support for the aviation industry.
As a result, several Canadian airlines have been struggling. Air Canada has suspended multiple regional routes, as has WestJet and both airlines have laid off lots of staff. But help might be on the way. In an interview with CTV, Intergovernmental Affairs Minister Dominic Leblanc answered several questions regarding potential aid for the aviation industry.
LeBlanc confirmed that should the situation remain the same or worsen, the government would be prepared to take a stake in the major airlines. When asked this question specifically, LeBlanc said,
“I know, my colleagues, [Transport Minister] Marc Garneau, and [Finance Minister] Chrystia Freeland, are looking at a whole series of options of what government support might look like for the sector. So we haven’t made any decisions in that level of detail yet, but they’re very much discussing that.”
Writing a blank cheque
However, the government is still not set on the idea. Many Canadians were disappointed when compensation for canceled flights was provided in the form of vouchers rather than refunds. LeBlanc walked a difficult line in the interview, saying that the Canadian people may not be impressed if the government steps in to save airlines, but customers don’t get their refunds.
LeBlanc said, “Canadians also expect us not to simply write blank cheques or bail out large corporations without addressing, as you said, the issue of vouchers.” However, as well as appeasing the Canadian people, the government is also having to deal with calls from workers’ unions to provide a bailout of CA$7 billion (US$5.3 billion).
Pilot and flight attendant unions, including CUPE and Unifor, have said the Canadian government should provide a bailout for airlines, which should involve the government taking a stake in the airlines. Several unions have cited Germany’s Lufthansa bailout, which saw the government take a 20% stake in the airline.
What could the deal look like?
For both Air Canada and WestJet, having the government as a stakeholder won’t be such a bad thing. The government partially owned air Canada until 1989, and WestJet was privatized just last year in a CA$5 billion (US$3.7 billion) deal.
Both airlines have laid off staff, cut services, and held onto money from passengers by refunding them with vouchers. If the government decided to bail out the airlines, we would undoubtedly see similar conditions to the CARES act loans in the US. It is likely that the government will restrict the airlines from laying off any more staff and will instruct them to refund passengers.
Additionally, the government will probably want to see many regional services restored. WestJet has cut 80% of seats in some areas leaving some places virtually cut off. If airlines want to accept government support, they will need to resume some services.
Whatever the government decides, it will have to act fast. Do you think the Canadian government will step in to help? What sort of deal do you think they will offer? Let us know your thoughts in the comments.
