Canada Promises Bailouts In Exchange For Refunds

Canada’s COVID-19 battered airlines will have to start refunding passengers before the government will provide them with financial assistance, says Transport Minister Marc Garneau.

The Minister, in a statement, said he anticipated beginning discussions with major Canadian airlines this week on an aviation sector-specific package of assistance. “As part of this package, we are ready to establish a process with major airlines regarding financial assistance which could include loans and potentially other support to secure important results for Canadians. We anticipate beginning discussions with them this week,” he said.

However, he added, any government assistance would be conditional on airlines refunding passengers holding tickets booked before the pandemic hit and who had effectively “given thousands of dollars in interest-free loans to airlines”.

“Canadians who had already booked travel ended up stuck with vouchers for trips they could not take instead of getting refunds,” he said. “Before we spend one penny of taxpayer money on airlines, we will ensure Canadians get their refunds. Any assistance the government of Canada provides will come with strict conditions to protect Canadians and the public interest.”

Canada’s airlines have been hit hard by COVID-19, with passenger levels down as much as 90%. In May, IATA predicted that Canadian airline revenues would fall by USD14.6 billion or 43% in 2020 from 2019. The crisis has resulted in airlines furloughing staff and suspending dozens of regional routes since March. Airlines cancelled numerous pre-booked trips, offering passengers credits or vouchers instead of refunds.

This prompted anger and outrage amongst many Canadians, reported CBC. It said the Canadian Transportation Agency had received 8,000 complaints between mid-March and the end of August, most of which were related to refunds.

Garneau said broad-based government support like the Canada Emergency Wage Subsidy had helped to mitigate the severe impact on employees in the sector. However, he conceded the industry could not respond to the challenges on its own, given the unprecedented impacts on its operations. He said the sector-specific assistance would aim to ensure that regional communities retained air connections to the rest of Canada. “A strong and competitive air transport industry is vital for Canada’s economy and the well-being of Canadians. Due to our vast geography, Canadians rely more heavily on air travel than other countries.

Following the announcement, Air Canada Chief Executive Officer Calin Rovinescu said the company was planning to engage immediately with the government. The airline’s shares surged more than 28% on the news of a potential COVID-19 vaccine and government assistance for the industry. However, the airline’s 3Q20 results showed it lost CAD685 million Candian dollars (USD525.2 million) in the three months ending September 30, 2020, during what was normally its most profitable quarter. The airline has already cut 20,000 jobs, suspended 30 domestic routes, and closed eight regional stations this year. It was reviewing another 95 routes for potential suspension and nine Canadian stations for potential closure.

WestJet , in response, said it was evaluating the government’s statement and would await greater clarity on what support for the aviation sector might be offered before making any further comment. The airline earlier this month announced it was the first Canadian carrier to start processing refunds resulting from the pandemic.

National Airlines Council of Canada president and Chief Executive Officer Mike McNaney in a statement said he was “encouraged by the government’s decision to work with carriers to try and stabilise the sector” but stressed more help was needed. “In addition to financial support, a federal testing strategy for aviation is critical to ensuring the industry is able to safely restart, address regional travel restrictions, and international border measures,” he said.

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