Ottawa Takes 6% Stake in Air Canada as $5.9B Deal Reached

On 19JUL, 1989, the federal government completed the sale of its 41.1 million shares in Air Canada – which represented a 57 per cent stake in the carrier – marking the full privatization of the airline.

Thirty-two years later, Ottawa is once again taking a stake in the carrier, albeit a much smaller one.

After months of negotiations, Air Canada has reached a long-awaited multi-billion dollar deal for financial support with the federal government and as a condition of the aid, Ottawa is taking six per cent ownership of the airline.

The aid package consists of a series of debt and equity financing agreements with the Canadian government. Under the terms of the deal, the government will be able to buy $500 million worth of shares in the airline.

In announcing the terms of the deal Monday evening, Finance Minister Chrystia Freeland said the equity stake would allow taxpayers to benefit when the airline’s fortunes recovered.

The Canadian government previously approved similar loans for four other companies worth up to C$1.billion, including up to $375 million to Sunwing Vacations Inc.

Michael Rousseau, Air Canada’s president and chief executive officer, said the liquidity “provides a significant layer of insurance for Air Canada.”

Throughout the negotiations, federal officials have openly stated that partial government ownership shouldn’t be ruled out as part of an airline bailout.

Intergovernmental Affairs Minister Dominic Leblanc first suggested the possibility during an OCT 2020 interview with CTV Question Period.

When asked if Canada is considering following in Germany’s footsteps, which took a 20-per-cent stake in Lufthansa, Leblanc said the government “is very much discussing that.”

In response, some industry leaders responded coolly to the idea of government ownership.

Karl Moore, a McGill University professor and airline expert, said the Canadian government acting as a “silent partner,” and buying a non-controlling stake in an airline, would be “a reasonable thing”, but anything more invasive is a bad idea.

“Government’s are good at (running) some things – airlines are not one of them,” Moore said.

Anna Kroupina

Journalist

Anna's day starts at 5:30 a.m. each morning to scour daily travel news headlines to find the most relevant stories for Canadian travel advisors. She contributes to writing the daily news and covers events. The Alberta Rockies, Hawaii and France's Provence region are among her favourite destinations. She's a proud cat mom and a terrible snowboarder.

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