Air Canada, Canadian government reach agreement in $5.9-billion ‘liquidity program’

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Air Canada and the federal government have reached an agreement on a $5.9-billion aid package that the company says will speed up customer refunds, protect industry jobs and return service to some communities that were shuttered due to the COVID-19 pandemic.

In a news release, Air Canada said the $5.879-billion liquidity agreement is provided through the government’s Large Employer Emergency Financing Facility (LEEFF) program and includes $4 billion in loans, a $500-million investment in Air Canada stock and a separate $1.4-billion loan to help facilitate customer refunds.

“I’m confident this agreement sets a standard for how such interventions should be designed with the interests of Canadians and workers coming first,” Deputy Prime Minister and Finance Minister Chrystia Freeland told reporters in French on Monday evening. “This is a good and fair deal for Canada and Canadians.”

As part of the agreement, Air Canada has agreed to several stipulations, including issuing refunds for passengers who had a booked a flight since February 2020 but did not fly, resumption of service to regional communities that were suspended or cancelled, no further job losses for its employees, and protections for employees’ pensions.

The refund process will begin no later than April 30, Freeland said. 

In addition, Air Canada must facilitate its planned deal for 33 Airbus A220 aircraft and its order of 40 Boeing 737 Max aircraft, and must provide climate disclosures.

“This deal also ensures that Air Canada remains a significant customer and supporter of Canada’s aerospace sector,” Transport Minister Omar Alghabra said during the news conference.  “Air Canada will now be able to complete its planned purchase of the Airbus A220, which will in turn support workers and companies across our entire Canadian supply chain.“

The suspended destinations slated for a return no later than June 1 include, Bathurst, Comox,  Fredericton, Gander, Goose Bay, Kamloops, North Bay, Penticton, Prince Rupert, St. John, Sydney and Yellowknife. Air Canada must also work with third parties to restore service to its permanently cancelled destinations.

“Today’s also a good news day for communities where services were reduced or canceled due to COVID-19,” Alghabra said. “The agreement we’re announcing today will help to re establish essential lifelines for economic activity and will help to reconnect Canadian communities.”

In a statement, Air Canada president and CEO Michael Rousseau said the financial aid will help the company, customers and stakeholders alike.

“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,”, said in a news release. 

“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.”

In February, the Air Canada announced it was cutting another 1,500 jobs and suspending 17 U.S. and international routes. The month prior, it cut around 1,700 jobs. In total, the company has axed more than half its workforce since last March, but has now guaranteed that no further layoffs are on the horizon.

“This announcement is good news for our 2,000 members still working at Air Canada and for the stability of the company going forward, but it’s tough to think this is what we waited 13 months for,” Wesley Lesosky, president of the Air Canada component of the Canadian Union of Public Employees (CUPE), said in a statement. “This announcement leaves over 7,500 of my members with no answers and no income supports.”

CUPE, which represents 10,000 flight attendants with Air Canada and Air Canada Rouge, said the financial package “betrays the government’s commitment to support airline workers affected by the pandemic.”

“We had a commitment from the Trudeau government that any relief money for the airline sector would flow directly to support workers, and that commitment is not reflected in this agreement,” CUPE National President Mark Hancock said in the statement.

“This deal is exactly what we feared a deal cooked up behind closed doors would look like: it’s a year late, no transparency, and not nearly enough to support the thousands of flight attendants still reeling from the impacts of the pandemic.”

The Liberals have long said sector-specific support would be contingent on airlines refunding passengers with tickets rendered useless following the cancellation of flights. International and domestic travel, while not prohibited, is highly discouraged at this time.

Freeland added on Monday that customer refunds will also be a key cog in any future agreements with other airlines.

“We are having good discussions with WestJet, discussions that I would characterize as constructive,” Freeland said.

“The basic, general requirements of the government of Canada, of course, will be the same: the importance of refunds, the importance of restoration of regional routes, the importance of maintaining employment, the importance of restrictions on executive compensation, but the precise shape of an agreement will depend on the specific needs of each airline.”

In a statement, WestJet said it “continues to operate self-sufficiently” with the exception of the federal government’s wage subsidy program and already plans to restore service to the 42 locales it suspended during the pandemic.

“We remain committed to building back even stronger for the betterment of all Canadians,” the company wrote in a statement. “A healthy WestJet will help lead a stronger recovery, increasing competition and consumer choice while lowering the cost of travel for Canadians, all while anchoring Canada’s vital air travel and tourism sectors.

The WestJet Group of Companies continues discussions with the Government of Canada on a safe travel-restart framework. We remain focused on a long-term solution that will serve the best interests of Canadians.”

The news comes as the Liberal government is set to unveil their highly-anticipated spring budget on April 19. In their November 2020 fall economic statement, $206 million was earmarked to support regional air transportation, but the government did not provide details of aid for large carriers.

Sources: CTV News

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