As Air Canada cruises down the runway with a newly-minted $5.9 billion aid package from the federal government, Ottawa is facing industry calls to extend a lifeline to other airlines, too.
New COVID-19 variants are dashing hopes for a relaxation of Canada’s strict travel requirements ahead of summer. Fears of a delayed recovery, along with the government deal with Air Canada, has upset the “level playing field” for air service with the airline’s smaller rivals, says the Air Transport Association of Canada (ATAC).
“We want everyone to have access to the same programs,” ATAC chief executive, John McKenna, told Reuters. ATAC represents approximately 70 carriers, including tour operator Sunwing and smaller airlines like Flair Airlines, Air Inuit, PAL Airlines and Nolinor Aviation, which operates Hola Sun’s flights on OWG.
According to Deputy Prime Minister Chrystia Freeland, the government is negotiating potential aid packages for other airlines, including WestJet, CBC reports. Freeland said the basic requirements of refunding customers, restoring regional routes, restricting executive compensation and protecting jobs would apply to other potential deals, but that each package would reflect the individual needs of the airline.
ATAC called for a “limited timeline” for finalizing such talks, saying it is crucial to maintaining a level playing field that guarantees Canadians have competitive air service.
“While the agreement announced yesterday is likely welcomed by Canadians, ATAC is deeply concerned that it has immediate negative consequences by upsetting the level playing field that guarantees Canadians with competitive air service,” ATAC said in a media release.
“Government interference in a market driven industry is not without consequence for consumers and stakeholders as holding stock in Canada’s dominant air carrier raises concern as to the government’s impartiality in finalizing deals with competing airlines and the ongoing stewardship of the industry in a way that promotes fair competition.”
Financial aid can only do so much in an environment where travel is severely restricted and seriously debilitated, McKenna warned.
Gov’t Under the Gun to Ink More Deals
Aviation industry analysts say with the AC deal out of the way, the federal government is now under pressure to strike a deal with other carriers, especially Air Canada’s main competitor, Calgary-based WestJet.
“WestJet is Alberta, in a sense,” Moore said. “With a federal election perhaps coming up in the fall, the government wants to make sure that Western Canada, and Calgary, feels looked after. There will be a lot of pressure,” Karl Moore, an airline industry expert and professor at McGill University, told the Calgary Herald.
Any aid package for WestJet will look different from the Air Canada one announced Monday, Moore said. As aviation consultant and president of AirTrav Robert Kokonis explains, airline aid is not a one-size fits all solution. Carriers’ capital structures vary depending on how they finance aircraft and their scope of operations, so each deal must look at the specific needs of an airline in order to be effective.
One glaring difference between the AC and WS deal may be the ownership structure. Ottawa took a six per cent stake in publicly-traded Air Canada as part of the loan agreement. WestJet, on the other hand, is privately owned by Toronto-based Onex Corp.
“WestJet is a whole different circumstance… The ownership position, I don’t think they would give,” Moore said. “We don’t even know for sure what Onex needs (in terms of financial aid for WestJet), because their books are closed.”
Rick Erickson, an independent aviation analyst based in Calgary, agrees.
“I can’t begin to imagine that WestJet would want any kind of government representation in the airline. You couldn’t do the same deal at WestJet that you could at Air Canada,” he said.
Erickson said he is sure a deal is coming for WestJet, as well as for the country’s smaller airlines, but he “couldn’t hazard a guess” exactly when.
WestJet CEO Ed Sims has been publicly critical of the government’s slowness to respond to the crisis in the aviation sector, and earlier this month called Ottawa’s failure thus far to offer an industry-specific aid package for airlines “disgraceful” and “scandalous.”
Transat, after its deal to be acquired by Air Canada fell through, has said it needs to secure at least $500 million in financing for 2021 alone in order to survive the pandemic.
In FEB, the government granted Sunwing access to $375 million of liquidity as part of the Large Employer Emergency Financing Facility (LEEFF), the same loan program to benefit Air Canada.