The Canadian government has cashed in on Air Canada.
Ottawa may dislike Air Canada’s baggage fees, but as the Globe and Mail reports, politicians are very happy with Air Canada's share price and have opted to sell the government's six per cent stake in the airline for a tidy profit.
The Trudeau government in April 2021 intervened to provide much-needed support to the country’s largest airline, rolling out a comprehensive bailout package that included a staggering $5.9 billion in loans. The objective was to stabilize Air Canada’s finances during the pandemic when it was incurring massive losses due to shutdowns and worldwide travel restrictions.
Ottawa also invested roughly $500 million to acquire Air Canada shares at around $23.18 each. Fast forward to this week, and the government has successfully capitalized on Air Canada’s stock surge, with an average selling price of approximately $25 per share.
Earlier statements from the Finance Department made it clear the government had no intentions of holding onto the shares indefinitely.
The government’s financial lifeline to Air Canada came with a series of stipulations aimed at safeguarding consumers and saving jobs. Notably, the airline was required to provide customer refunds and couldn't use the bailout funds for share buybacks. Additionally, executive compensation was capped at $1 million.
The Globe and Mail story on the share sale was confirmed by two federal government sources, CTV News reports.
Ian Lee, associate professor at Carleton University's Sprott School of Business, told CTV says the government should have never bought shares in Air Canada in the first place.
"Its role is the referee of the hockey game, it should not own the hockey team or tell Sidney Crosby when to shoot the puck," he said. "The government of Canada provided billions of dollars to many thousands of corporations in Canada and did not take ownership positions in all those other companies."
Lee said the sale is likely connected to the government's pending fiscal statement on 16DEC, suggesting Ottawa is peering into every available cupboard it can to find money to spend.
