Feds announce over $4 billion in support to Air Canada to restart cancelled routes, provide refunds for travel cancelled due to pandemic

Funding from the federal government means Air Canada will be able to restart some cancelled routes and complete its purchase of the Airbus A220, pictured here, which is built in Canada. (Air Canada photo)

The federal government has agreed to provide loans to and buy shares from Air Canada in order to ensure refunds for air travel cancelled due to the pandemic and continuous air service to a handful of airports where services were temporarily suspended.

The federal government announced the spending Monday. As a condition of receiving federal support, Air Canada will maintain air connections to the rest of Canada through some regional communities, ensure any customer who wants a refund for certain pandemic-related cancellations can get one, airline jobs, pensions and collective agreements are protected and Air Canada remains a customer for Canada’s aerospace sector.

“This financial support announced today, in the form of repayable loans and an equity investment will help Air Canada weather the current economic downturn and will protect thousands of Canadian jobs,” the federal government said in a press release.

“The Government of Canada remains committed to supporting people who work in the air sector and Canadian airlines and during this unprecedented and difficult time for the industry. The government is also committed to supporting the gradual return of commercial activity in the aviation sector in Canada in a way that continues to prioritize the health, safety, and security of all Canadians.”

The federal government said it is still negotiating with other Canadian carriers on financial support and any agreement reached with them will also include a requirement that pandemic-related cancellations are refunded. If an airline does not need liquidity support, the government said, it will help provide voucher refunds to customers.

“From coast to coast to coast, it is essential we maintain connections between people and our communities, large and small,” said Finance Minister and Deputy Prime Minister Chrystia Freeland.

“Protecting Canadian customers is important. And maintaining a competitive Canadian air sector, Canadian airlines, and the thousands of good jobs in this sector is a priority. This is what today’s announcement with Air Canada guarantees.”

Monday’s announcement is the latest support for the airline sector. Airline sector workers have received over $2.1 billion in support through the wage subsidy, and last year the sector received more than $1 billion in support directed to airports and smaller airlines.

The financial support is being provided under the Large Employer Emergency Financing Facility (LEEFF) through the Canada Enterprise Emergency Funding Corporation (CEEFC), a federal Crown corporation incorporated in May 2020.

CEEFC will provide $4 billion in repayable loans and an investment of $500,000 in newly-issued Class B Voting Shares at a 15 per cent discount to their trading price. They will also receive warrants on stock in an equal amount to 10 per cent of the loan commitments.

In return, in addition to refunding cancelled travel, Air Canada will maintain jobs at current levels of 14,859 employees, respect collective agreements and protect pensions. They will also resume service buy no later than June 1 at Bathurst, Comox, Fredericton, Gander, Goose Bay, Kamloops, North Bay, Penticton, Prince Rupert, Saint John, Sandspit, Sydney and Yellowknife. For seven airports where they permanently cancelled service, they will seek agreements with other carriers to ensure residents continue to have access to their preferred airports.

Air Canada will also complete its planned purchase of aircraft, including the Airbus A220, built in Canada. The A220 was originally designed by Bombardier and sold as the CSeries.

“The aerospace industry supported 235,000 Canadian jobs and contributed over $28 billion in gross domestic product to the Canadian economy in 2019,” the federal government said.

“Aerospace is one of the most innovative and export-driven industries in Canada. The negative impact of the pandemic on the bottom line of airlines has put the relationship between airlines and the aerospace industry at risk, threatening job security in the sector. Ensuring that Air Canada maintains its status as a key customer of Canada’s aerospace industry is important to ensuring the long-term success of the sector and the thousands of jobs it supports.”