LONDON – According to a report from Reuters, the Canadian Government is close to producing a bailout for the airline industry.
A government source stated, in a pun-like perspective, that the government is “running out of runway on this”, amid criticism that not enough consideration is being taken on the airline industry.
Such criticism is down to the fact that a lot of remote areas across the world’s second-largest country by landmass is connected by air.
The likes of Air Canada (AC) have already shaved half of their workforce due to the continued effects of the COVID-19 pandemic. AC also reported a Q2 loss of $1.75bn, resulting in the carrier to raise $1.23bn in liquidity to remain afloat during this difficult period.
Back in June, WestJet (WS) announced it would cut 3,333 jobs for the same reason, as well as take measures such as phasing out its Boeing 767 fleet and suspending flights at Four Atlantic Canada Stations.
Such intense cutting procedures has finally raised the attention of Finance Minister Chrystia Freeland who is now looking at how the airline sector can be helped, especially as its becoming clear that it will not recover in the Fall of this year.
Sources at Reuters said that whilst “discussions are ongoing, they’re positive”, with the key focus being the sector and regional routes itself. It is understood that the Canadian Government is considering two options in regards to such help. The first is governments taking stakes in airlines, but has been dubbed as unlikely.
Another proposal, which so far has been strongly supported by unions, is a C$7bn loan into the industry which would be repaid on a low-interest basis over 10 years. This however, does come with some political caveats.
If the Canadian Government was to instigate such a bailout on the airline industry, this would result in other sectors across Canada asking for the safe. Those inside the government have said that it has to be “careful to get it right for workers in the sector and invest responsibly for Canadians.”
Up to now, the government has supported the industry valued at C$1.3bn, which has been mainly used to help pay wages to those affected during the pandemic. On top of this, ground lease rents have been waived for a year as well as providing C$192m to the northern air carriers that provide important airlinks.
It remains clear that whilst the Canadian Government are trying to invest safely and responsibly, more action may be needed in order to deal with this ongoing crisis.
As Jerry Dias, the head of Unifor union stated, “you can’t have a strong recovery without strong airlines”. Until the government gives a helping hand, there is nothing that the private sector can do other than raising liquidity, which is becoming more narrow as time goes on.
All eyes will now be on the Canadian Government to determine what its decision will be, and whether it will be positive or detrimental to the Canadian air industry.
Featured Image: WestJet Boeing 737-800. Photo Credit: Liam Funnell