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Airlines disappointed by the lack of a bailout plan in federal fiscal update

Airlines disappointed by the lack of a bailout plan in federal fiscal update-Milenio Stadium-Canada
Canadian airlines have been pushing the federal government for sectoral support for months as the pandemic continues to ground an unprecedented number of flights. (Darryl Dyck/Canadian Press)

 

Groups representing the airline industry say they’re disappointed the federal government’s economic update failed to offer the sector — hit hard by the pandemic — new aid to help it survive the crisis.

WestJet shuts down most of its operations in Atlantic Canada

The federal government said it’s prepared to spend $980 million on supports and rent relief for Canadian airports. It did not, however, explain how it aims to help air carriers struggling with a drop in demand of up to 90 per cent that has caused them to cancel dozens of regional routes and lay off or furlough thousands of workers.

Mike McNaney, president and CEO of the National Airlines Council of Canada, represents the country’s largest carriers, including Air Canada, WestJet and Air Transat.

“While other countries around the world have moved forward months ago to provide sectorial support, we remain a global outlier and are ostensibly stuck at stage zero in the government planning process,” said McNaney.

“We need to get moving. We need to get going on this.”

The fiscal update says that since the beginning of the pandemic, airlines have received over $1.4 billion in support through the wage subsidy. The update also says the government is now “establishing a process with major airlines regarding financial assistance” that is contingent on Canadians being refunded for flights cancelled due to COVID-19.

More than 100,000 Canadians have joined petitions calling on the government to take action to compel airlines to refund passengers for cancelled flights, and several class-action lawsuits have also been filed.

Finance Minister and Deputy Prime Minister Chrystia Freeland said $1.2 billion is in today’s economic budget for airports, airport infastucture, and regional airlines. She said detailed talks are underway with major airlines about more support.

“In order to know exactly how to support them, we need to really see what their financial position is,” Freeland told CBC’s Chief Political Correspondent, Rosemary Barton.

$206 million to help regional air transportation

The fiscal update proposed $206 million over two years to “support regional air transportation, including regional air carriers” by giving the funds to “Regional Development Agencies” to create a new “Regional Air Transportation Initiative.”

“It doesn’t begin to cover what needs to be done,” John McKenna, president of the Air Transport Association of Canada, told CBC News. “We’re very disappointed again.

“This government does not get our industry. They don’t understand the trouble we’re in.”

McKenna’s organization represents about 35 large and small airlines, including Porter — which has grounded its entire operation— leisure carrier Sunwing and more than a dozen regional operators that serve rural and remote communities.

McKenna said his organization wasn’t consulted and it’s not clear to him exactly what this regional initiative is.

“Our industry has been working for over eight months now at 15 per cent capacity and we still have 100 per cent of our debt load there,” said McKenna. “The government’s done nothing to help us, other than saying, ‘I feel your pain.'”

Boost to the wage subsidy

The government does plans to boost the wage subsidy back up to cover 75 per cent of employees’ wages to deal with the “ferocity of the second wave,” according to the fiscal update. Currently, the maximum rate is 65 per cent.

But McKenna said that subsidy doesn’t pay off airlines’ capital debt.

“The hard part of the industry is that it’s heavily leveraged because they have to buy planes, hangers and equipment and are heavily indebted and don’t have revenues to compensate,” he said.

McNaney said he was hoping to see details of a financial aid program, more support for regional airlines, funding for Nav Canada (so it doesn’t have to increase fees for airlines) and rapid-COVID-19 testing at airports. Instead, he said, the government repeated the same message the industry has been hearing for months.

People line up and check in for an international flight at Pearson International airport-Milenio Stadium-Canada
People line up and check in for an international flight at Pearson International airport during the COVID-19 pandemic in Toronto on Wednesday, Oct. 14, 2020. (THE CANADIAN PRESS)

The spokesperson for Air Transat, Christophe Hennebelle, said the economic statement was a missed opportunity to announce a “robust plan” to make sure Canada’s airline industry remains competitive.

“We are disappointed,” Hennebelle said in a statement. “We are still awaiting the start of discussions on the assistance announced on November 8, while significant support for the sector has already been provided in many countries around the world for months.”

$980 million in payments, rent relief slated for airports

The economic update did include $500 million over six years proposed to start a new transfer payment program for large airports. Projects like the Réseau express métropolitain station at the Montreal Airport would be eligible for funding, according to the statement.

The government is also planning to extend $229 million in rent relief to airport authorities that pay rent to the federal government and Billy Bishop Toronto City Airport. An additional $65 million is expected for airport authorities in 2021.

Another $186 million would be aimed over two years starting in 2021 to help small and regional airports through the “Airport Capital Assistance Program.”

Daniel-Robert Gooch, president of the Canadian Airports Council, said it will take a few days to understand in greater detail what was announced, but suggested it wasn’t enough.

“It’s good to see the air sector get direct attention but this falls quite short of what the industry needs to endure this crisis,” said Gooch in a statement to CBC News.

Tim Perry, president of the Air Line Pilots Association, said the support for airports should have a “positive spinoff” for airlines. He said his group continues to call on the federal government to remove “barriers” in place for airlines to return to flying when “Canadians are ready to travel again.”

Talks started this month with major airlines about bailout

After months of mounting pressure from the industry, the government started talks this month with Canada’s major airlines about an industry-specific bailout package that could include loans and other support.

The Globe and Mail reported the talks got off to a slow and frustrating start. The government had a list of demands, including airlines opening their books, refunding passengers for cancelled flights and avoiding the cancelation of planned purchases of new planes made in the country, the Globe said.

Earlier in the day, Conservative MP Matt Jeneroux, who represents Edmonton Riverbend, took aim at the government for not providing industry-specific support quickly enough.

“Though other countries around the world immediately offered support for their airlines, this government didn’t’ acknowledge the crisis until eight months into the pandemic,” Jeneroux said during question period today.

Check-in kiosks are covered in plastic -Milenio Stadium-Canada
Check-in kiosks are covered in plastic at the domestic check-in at Vancouver International Airport, Tuesday, June 9, 2020. (Jonathan Hayward/Canadian Press)

Transport Minister Marc Garneau said earlier this month that “a strong and competitive air transport industry is vital for Canada’s economy,” but said an aid package would be conditioned on airlines offering refunds.

“Before we spend one penny of taxpayer money on airlines, we will ensure Canadians get their refunds,” said Garneau on Nov. 8 in a press release.

Since then, Nav Canada has warned its air traffic controllers across the country that layoffs are on the way as part of a “full restructuring.” The company monitors millions of square kilometres of airspace and its air traffic controllers keep planes separated in the sky and on the ground.

The company has seen a $518 million drop in revenue compared to its budget. According to the internal memo, Nav Canada has been “pressing” the government for help. Since Sept. 22, the company has cut more than 700 managers and employees — 14 per cent of its workforce and almost all of its students. Nav Canada is also studying seven towers across Canada for possible reductions in service.

CBC

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