Canada isn't ruling out taking a stake in Canadian airlines: Leblanc


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OTTAWA -- The Canadian government isn't ruling out the possibility of taking a stake in Canadian airlines, like WestJet and Air Canada, as ministers consider how to help the sector in its struggles amid the COVID-19 pandemic.

Intergovernmental Affairs Minister Dominic Leblanc confirmed the possibility during an interview with CTV Question Period Host Evan Solomon, airing Sunday

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https://beta.ctvnews.ca/national/politics/2020/10/18/1_5148841.amp.html

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That’s very interesting. I believe that’s how Germany supported Lufthansa, by taking a 20% ownership stake. I don’t know how much it cost them. But, there is precedent for such an action, when our government took a stake in some big auto manufacturing in Canada.

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I'd still rather see the government trade loan guarantees for some of the airlines' accrued tax losses. Nor do I know if Onex is ready to give up total control, so it might campaign against a bailout structure of that kind. While most ire about bailing out carriers will end up pointed at AC, I suspect there will be opposition on the left (NDP for sure) about bailing out Onex on this. Certainly, if the govt wants to take a 20% share of the airlines it helps, it also suggests to me they first have to approve the Transat takeover. (I mean, if they became TS shareholders and then rejected the merger, they would probably have to put additional money into TS to keep it afloat.)

 

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Regional airlines reject prospect of government stake in carriers

Published Monday, October 19, 2020 1:28PM EDT
PLANE

An Air Canada flight departing for Toronto, bottom, taxis to a runway as a Westjet flight bound for Palm Springs takes off at Vancouver International Airport, in Richmond, B.C. (Photo: THE CANADIAN PRESS/Darryl Dyck)

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OTTAWA -- Regional airlines are demanding immediate action from Ottawa to prop up the beleaguered sector, but reject the idea of a federal stake in carriers.

John McKenna, president of the Air Transport Association of Canada, says the government has not responded to requests for cash over the past six months, leaving Canada as the only G7 country to hold off on pledging major financial aid for the industry.

Intergovernmental Affairs Minister Dominic LeBlanc left the door open to a bailout, including the purchase of airline shares by Ottawa, in an interview with CTV's Question Period on Sunday.

LeBlanc said Canadians expect stringent conditions on any federal airline funding that address the issue of travel vouchers, which carriers gave passengers instead of refunds for cancelled flights.

The United States and some European countries have demanded airlines provide reimbursement while offering them billions in financial aid, with strings attached that include 20 per cent government ownership in the case of Lufthansa and emissions reduction commitments from Air France-KLM.

Last week, Prime Minister Justin Trudeau pledged $41 million in emergency funding for northern airlines to ensure services for remote communities.

This report by The Canadian Press was first published Oct. 19, 2020.

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On 10/18/2020 at 11:11 AM, dagger said:

I'd still rather see the government trade loan guarantees for some of the airlines' accrued tax losses. Nor do I know if Onex is ready to give up total control, so it might campaign against a bailout structure of that kind. While most ire about bailing out carriers will end up pointed at AC, I suspect there will be opposition on the left (NDP for sure) about bailing out Onex on this. Certainly, if the govt wants to take a 20% share of the airlines it helps, it also suggests to me they first have to approve the Transat takeover. (I mean, if they became TS shareholders and then rejected the merger, they would probably have to put additional money into TS to keep it afloat.)

 

I doubt Onex would sell for what Ottawa is likely to be offering.

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Federal cabinet readies airline bailout package

Fri Oct 23, 2020 - The Globe and Mail
Robert Fife - Ottawa Bureau Chief
Andrew Willis
Eric Atkins - Transportation Reporter

OTTAWA - The federal cabinet is deliberating a targeted bailout package for Canada’s airline industry that includes offers of low interest loans and rollbacks of airport fee increases to help it cope with the fallout from the coronavirus pandemic.

The package of options that cabinet is reviewing recognizes that air travel is essential to the Canadian economy, and could come in the November economic statement or the next federal budget, expected in February or March, according to a senior government official and three industry sources. The Globe and Mail is not identifying the sources because the the government official is not authorized to discuss cabinet deliberations, and the others are not authorized to speak on behalf of their companies.

The federal government plans to make financial support conditional on two potentially controversial requirements: Public money cannot be used to pay air executives, and carriers may be asked to restart flights on routes that have been closed during the pandemic, according to the government source.

Air Canada cancelled 30 domestic routes in June, and WestJet Airlines Ltd. cut 80 per cent of its flights to the Atlantic provinces this month. Ottawa does not expect that the airlines would have to resume all routes to receive the bailout. According to the government source, financial support would require airlines only to resume key regional connections.

Large and small airlines have been lobbying for support from the federal government for months in the unprecedented crisis, as the pandemic kept passengers off planes and closed routes, bringing significant financial losses. In the past, Air Canada chief executive Calin Rovinescu has said government support should have minimal strings attached.

“If you look at the airline industry, it has taken a significant hit," Navdeep Bains, Minister of Innovation, Science and Industry, said when asked about the issue at an unrelated news conference on Thursday. "We recognize that as a government. We continue to work with the airline industry and all the relevant stakeholders to look at next steps of how we can support them, and support the workers and communities.”

Canada’s airlines had more than 50,000 employees when the pandemic began. In addition, tens of thousands of Canadians have jobs directly tied to the sector, including those who work at airports, in air transport and 4,600 employees at Nav Canada, the national air traffic controller.

To cope with reduced traffic, many airports and Nav Canada increased fees in recent months, hiking the cost of a cross-country flight for a family of four by about $100. Airlines want fees rolled back as part of a campaign to get the public to resume air travel.

While the government official cautioned that no decision has been made, cabinet is looking at offering loans at low interest rates through the Business Development Bank of Canada, Export Development Corporation or some other means of direct government backing.

It’s unlikely federal money would come from the Large Employer Emergency Financing Facility program set up by former finance minister Bill Morneau. The program offers loans at rising rates of 5 per cent to 8 per cent, but few companies have used it. The large airlines can sell bonds at 4 per cent. John McKenna, chief executive officer of the Air Transport Association of Canada, said the airlines need forgivable loans, or access to low-cost credit.

The federal cabinet is also considering a payroll support package that mirrors a U.S. initiative, the government source said. In March, the U.S. Treasury department rolled out a US$25-billion program for domestic airlines. By the end of September, seven of the largest U.S. carriers had received loans under the program, including American Airlines and United Airlines. To tap this funding, the U.S. airlines must fly to all destinations they served before the pandemic, unless they receive a government waiver.

The Liberals have not ruled out buying shares in smaller airlines that face a serious financial crunch, particularly those serving northern communities. However, the industry sources said the government is unlikely to invest in larger airlines such as Air Canada, WestJet and Porter Airlines.

The official stressed that the government will make it a condition of the bailout that no federal money go to executive compensation. In 2017, Ottawa issued a $372.5-million loan to Montreal-based Bombardier Inc., which makes business jets and rail products, and the company gave its executives US$32.6-million in bonuses.

In the absence of government support, Nav Canada announced in May that it would hike its fees by 29.5 percent, effective in September. In a press release at the time, the company said: “NAV Canada acknowledges this increase comes at a time when its customers are also in exceptionally difficult circumstances as a result of the COVID-19 pandemic.” Chief executive officer Neil Wilson said: “All available alternatives, including further government assistance, will continue to be explored and utilized in order to minimize or avoid the proposed rate increase.”

The Greater Toronto Airports Authority, owner of Toronto Pearson International Airport, increased its airport improvement fee by 20 per cent to $30 per departing passenger at the end of September – the first hike in 12 years. The Winnipeg Airports Authority raised its fee by more than 50 per cent, from $25 to $38, in September. Early this month, Halifax’s airport announced plans to increase its improvement fee by 25 per cent to $35 in January.

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3 hours ago, Airband said:

“If you look at the airline industry, it has taken a significant hit," Navdeep Bains, Minister of Innovation, Science and Industry, said when asked about the issue at an unrelated news conference on Thursday.

Thanks for the observation Bains. You and Garneau really have this all under control; I can sleep better tonight.

Seriously, are there any prerequisites to being a Government Minister in our country?

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Don Martin: Airlines can't defy the gravity of this pandemic without a government lift

Published Friday, October 23, 2020 1:39PM EDT
Airlines

Empty seats are seen during a flight from Vancouver to Calgary, Tuesday, June 9, 2020. Airlines in Canada and around the world are suffering financially due to the lack of travel and travel bans due to COVID-19. THE CANADIAN PRESS/Jonathan Hayward

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NANAIMO, B.C. -- Long before takeoff you see and feel the airline-jolting turbulence kicked up by COVID-19.

Flying into the second wave is an eerie and unsustainable combination of dreamy passenger conditions inside a daily nightmare for airlines now turning to the federal government for financial lift.

Take my flight to Nanaimo this week, a trip greeted with dismay and protests from family and friends.

It started at a usually jammed Ottawa terminal parking garage where I had the luxury of ignoring a spot two rows from the entrance to claim one just two spots from the door.

That was just the disorientating start to a strange new experience for someone who has been flying on mostly-packed planes for more than 50 years.

Next stop, an empty terminal. I mean that literally, not figuratively. In Canada’s sixth busiest airport, there were less than 40 people in the cavernous departure area at 7 a.m. on a normally busy weekday.

The flight departure board listed just 11 flights for the entire day. Not one flight was heading outside Canada. Every single one was on time because, having surplus planes stacked up around the gates, means there’s no need to wait for turnaround planes.

The big bonus for that: I had one person ahead of me in line for the temperature check and baggage scan.  

The only change at security, beyond the shuffling lineup of passengers, was the friendly and helpful staff. Gone were the sometimes curt and cranky commands to take off belts and haul out laptops. It took four minutes to clear.

The departure lounges are an even more ominous indicator for airports needing those formerly-lucrative retail dollars to keep the lights on.

The outer wings were deserted while the Starbucks, Tim Hortons and my favorite pub are closed. The Maple Leaf Lounge, not that this back-of-the-plane passenger qualifies for better-class entry, was dark.

The actual flying part of the process is a breeze. Boarding started on time, the doors closed early with 60 passengers on a plane configured for more than 150 (but the flight attendant told me her next flight was packed) and we were in the air three minutes before the scheduled departure time with the middle seat mercifully empty.

They hand out a goodie bag, more like a pandemic survival kit, which has water, a mask, sanitizer, earplugs and the always-awful pretzels.  

If it weren’t for the uncomfortable N-95 mask strapped on for six hours, this would’ve been my best-ever airborne experience.

And yet, it was the first time I’ve felt apprehension and sensed nervousness all around me.

Every cough attracted stares from nearby passengers. Sneezes had to be suppressed. Sniffles silently dealt dispatched.

And no wonder. While every cleaning and distancing precaution is being taken, there’s still a sobering list of 41 domestic flights in the last two weeks with alerts for passengers who sat near someone who tested positive.  

Unknown is how many of the surrounding passengers, if any, caught the virus while on board.

And so we’re confronted by a business model which cannot keep planes in the air while hundreds of thousands of pre-pandemic passengers keep themselves grounded.

My source in Transport Canada says speculation about incoming federal relief is mostly accurate with forgivable loans and potential breaks in landing fees.   

But the optics are tricky with higher priorities on the government’s radar than bailing out companies which stacked and packed passengers profitably for many years.

It needs to be sold as a hand-up, not a handout, particularly to keep routes into Atlantic Canada on standby until protectionist premiers pop that four-province bubble.

After flying across Canada, it’s clear the current pandemic flight path cannot be sustained until travel returns to normal sometime in 2021.

Airlines can’t defy the gravity of the situation with parked fleets, half-empty planes and deserted terminals.

That, unfortunately, is the plane truth.

 
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There is an important case for bailing out troubled industries in certain circumstances – when there is a temporary period of turmoil after which companies can be expected to return to normal. This helps to preserve consumer choice, competition, and jobs that would otherwise have been lost. For example, these bailouts were necessary, and successful, for the airline industry following 9/11, and the automobile industry following the 2008 financial crisis.

But it is not clear that this is the case with the airline industry in Canada. There is still no end in sight for the coronavirus pandemic, and even the vaccines under development may well take years to fully roll out. Canada expects to see ups and downs for many months, during which public worries about travel will remain, as will travel restrictions and quarantine rules. With such uncertainty, and especially given the many urgent demands on government funds, a bailout for airlines feels like a bottomless pit.

Government should only bail out airlines under strict conditions

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