Federal government, Air Canada reach deal on relief package that includes customer refunds

The federal government has reached an agreement with Air Canada that will provide the pandemic-battered airline with financial support — while committing the airline to refunding customers who saw their flights cancelled last year because of the COVID-19 pandemic.

Air Canada cutting about 1,700 jobs as it reduces capacity

At a news conference in Ottawa on Monday, Finance Minister Chrystia Freeland and Transport Minister Omar Alghabra said the government will provide Air Canada with up to $5.9 billion through the Large Employer Emergency Financing Facility, a program aimed at supporting large Canadian employers who have lost revenue due to COVID-19.

Under the deal, the government will extend to the country’s largest airline a variety of low-interest loans worth up to $5.4 billion and take an equity stake in the company by purchasing $500 million in stocks.

In exchange for federal government support, Air Canada has agreed to refund customers who had their flights cancelled last year because of the COVID-19 pandemic.

The airline also has agreed to restore flights on nearly all suspended regional routes, to cap compensation for company executives at $1 million per year and to suspend share buybacks and the payment of dividends to shareholders during the loan period.

In addition, Air Canada said it would to maintain its workforce at current levels, respect collective bargaining agreements and protect workers’ pensions. The company currently has 14,859 active Canadian employees, although it employed over 38,000 employees before lost revenue caused it to lay off tens of thousands of workers.

“Taxpayers aren’t footing the bill. This is a loan facility, and the government of Canada fully expects to be paid back,” said Freeland.

“This is a good and fair deal for Canada and Canadians.”

Lifeline for a battered industry

Today’s agreement — reached after months of negotiations — promises a desperately needed lifeline for an industry that’s among those hardest hit by COVID-19.

Air Canada’s passenger numbers declined 73 per cent in 2020 following several years of record growth. During 2020, it reduced staff by more than 20,000, more than half of it pre-COVID total. Then, it cut another 1,700 employees in January.

The company has already collected $554 million from the Canada Emergency Wage Subsidy in 2020 and said it would continue to access the program in 2021.

In February, former Air Canada president and CEO Calin Rovinescu called 2020 the “bleakest year in the history of commercial aviation” when he announced the airline had lost a staggering $1.16 billion in the fourth quarter.

“The additional liquidity program we are announcing today achieves several aligned objectives as it provides a significant layer of insurance for Air Canada, it enables us to better resolve customer refunds of non-refundable tickets, maintain our workforce and re-enter regional markets,” Michael Rousseau, the airline’s current president and CEO, said in a statement.

“Most importantly, this program provides additional liquidity, if required, to rebuild our business to the benefit of all stakeholders and to remain a significant contributor to the Canadian economy through its recovery and for the long term.”

Customers who purchased non-refundable fares but did not travel due to COVID-19 since February 2020 will be eligible to receive refunds as of April 13, the company said.

Freeland said anyone who bought a ticket before the government announced travel restrictions on March 22, 2020 that either they or the airline cancelled will be eligible for a refund. Those who purchased tickets after that date but had their flight cancelled by the airline will also be eligible, she said.

Kathleen Fisher, an Air Canada customer from Quebec who was out $2,000 for flights she and her daughter never took to Jamaica last May, said she was overcome with emotion upon hearing news of the deal.

“It wasn’t so much about the money. It was more about — being in a pandemic like this — we could have used the money back to pay bills or, especially my daughter, she could have used the funds as well,” Fisher told CBC.

Freeland said the government is still negotiating potential aid packages for other airlines, including Calgary-based WestJet. She said the basic requirements of refunding customers, restoring regional routes, restricting executive compensation and protecting jobs would apply to other potential deals, but that each package would reflect the individual needs of the airline.

In a statement, WestJet spokesperson Morgan Bell confirmed the company is in talks with the government over what it called a “safe travel-restart framework.” Bell said WestJet has pledged to restore service “at our earliest opportunity” to the 42 airports it served before the pandemic began and that its refund policy is “industry-leading.”

“We remain committed to building back even stronger for the betterment of all Canadians. A healthy WestJet will help lead a stronger recovery, increasing competition and consumer choice while lowering the cost of travel for Canadians,” Bell said.

‘Workers should be happy’: union leader

The government said the financing will also allow Air Canada to continue supporting the country’s aerospace industry — in part by allowing it to complete the purchase of 33 Airbus A220 aircraft, manufactured at Airbus’ facility in Mirabel, Que., and a separate order for 40 Boeing 737 Max aircraft.

Jerry Dias, national president of Unifor, which represents about 15,000 workers in the airline industry, called the agreement a “win-win” for the government, consumers, the industry and airline workers.

“You’ve got consumers [who] are winning because Air Canada is going to give back their refunds. Taxpayers are winning because these are straight loans, it’s not grants. And the federal government will take about $500 million worth of shares or six per cent ownership,” said Dias in an interview on CBC’s Power & Politics.

“All in all, I think workers should be happy … it’s a win-win for everyone.”

Dias said Air Canada’s commitment to purchase Airbus and Boeing Max jets will help sustain aerospace industry jobs, particularly in Quebec and Manitoba.

“This protects a heck of a lot of jobs,” Dias said.

CBC