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Feds announce $5.9B aid package to Air Canada to help customer refunds, jobs

WATCH ABOVE: All airlines eligible for loan to help refund customers impacted by COVID-19 pandemic: Freeland

The federal government says it will be supporting Air Canada with a multi-billion dollar aid deal to help cope with massive financial losses and  millions in customer refunds for cancelled trips amid the COVID-19 pandemic.

Speaking at press conference Monday evening, Deputy Prime Minister Chrystia Freeland announced the government’s decision to “step in to support Air Canada, its nearly 15,000 active employees and its customers.”

According to Freeland, the support will be in the form of a $4 billion loan as well as $500 million in equity — giving the government a stake in the airline for the first time since its privatization in 1989.

Read more:
Air Canada cuts 1,500 jobs, suspends more international flights

A separate $1.4 billion loan will also be used as a “voucher refund facility” for Air Canada. Freeland said that all Canadian airlines are also eligible to to receive these loans in order to refund their customers.

An earlier statement from the federal government confirmed the deal ahead of its announcement, but also stated several conditions which the airline promised to uphold.

These promises include:

  • Maintained air connections between regional communities, such as Bathurst, Fredericton, Yellowknife and Kamloops, to the rest of Canada.
  • A guarantee that all Air Canada jobs, pensions and collective agreements are protected.
  • The airline remains a customer in Canada’s aerospace sector.

Lastly, the agreement promises that any Air Canada customers who want a refund over “pandemic-related cancelations” will be able to get one.

According to Freeland, the process for refunds will begin no later than April 30 and will be available for tickets purchased on or before Mar. 22, 2020 and for tickets after Feb. 1, 2020 that were either cancelled by the passenger or the airline.

Read more:
Air Canada ready to refund flight cancellations in exchange for bailout: union

Refunds for tickets bought after Mar. 22, 2020 will also be available if the flight was later cancelled by Air Canada.

The aid package also restricts dividends and share buybacks in the company, with Freeland adding that airline executive compensation will be capped at $1 million annually.

“So this announcement tonight marks a great milestone in our effort to help Canadians and our economy weather the impact of the global pandemic and build back better,” said Transport Minister Omar Alghabra.

According to Freeland, more details were also set to be announced on any subsequent deals with other airlines once negotiations with them were completed. This was also echoed by Alghabra, who said they were continuing to “have active discussions with other airlines as well.”

A statement from Air Canada also confirmed its deal with the federal government.

“As vaccine deployments ramp up, we continue to work with the Government of Canada on the evolution of safe and science-based test and quarantine relief measures with a view to safely restarting our sector,” read a statement from Michael Rosseau, Air Canada’s President and CEO.

“We know that Canadians are looking forward to re-connecting with friends and family and taking those long-awaited vacations and business trips and we will be ready to safely connect Canadians within Canada and Canada to the world.”

Gabor Lukacs, president of consumer advocacy group Air Passenger Rights told Global News what he heard from federal announcement was “bittersweet news” to him.

“On the one hand, passengers may be seeing their money, but actually what they are seeing is just taxpayers’ money,” he said in an interview Monday evening.

Lukacs said that the company should have been required to provide even more equity stake to the government in exchange for financial assistance.

Read more:
Ottawa’s financial relief deal for Air Canada: what it means for customers

“Air Canada is getting a substantial amount of unsecured loans from the public purse, and that is the money that is going to be used for refunding passengers instead of Air Canada shareholders paying for it — that doesn’t sound to me to be right.”

The last element he thought was missing from the deal was some sort of personal accountability for senior executives, who Lukacs alleges to have been misappropriating the public’s money during the COVID-19 crisis.

“This deal signals to the world that Canada is a safe haven for white collar crime.”

Global News learned earlier that the relief package — first reported by CBC News this afternoon — had a focus on customers and consumers.

A source familiar with the package’s details told Global News then that the agreement would not be a straight bail-out for the airline.

The package’s confirmation also comes as airlines were made to bear much of the brunt the COVID-19 pandemic wrought on the Canadian economy. Many airlines including both Air Canada and WestJet were either forced to cancel or refund their flights due to the virus.

In a statement Monday, Unifor President Jerry Dias said that the new measures were an important step on the road to Canada’s economic recovery.

“The relief package provides a good balance of certainty for communities large and small, the company, and its workers,” said Dias, whose union represents over 16,000 members working in the air transportation sector.

“We look forward to working with Minister Freeland to see that other Canadian carriers can achieve similar supports so good jobs across the sector can be protected.”

In March, Global News confirmed comments from Dias, who said then that Air Canada had “absolutely agreed to Ottawa’s demands that the airline repay customers who weren’t reimbursed for their plane tickets.”

Speaking with Global News, Dias also clarified then that a poised agreement between the airline and Ottawa — which would focus on customer refunds or exchanges — would be in exchange for a loan, not a bail-out.

He also said then that the loan they were originally going to take would be that of $7 billion that would be paid back on a one per cent interest rate per year over 10 years, but later added that the $7 billion “should now be the floor — not the ceiling.”

— With files from Global News’ Mercedes Stephenson, Hannah Jackson and Emerald Bensadoun

© 2021 Global News, a division of Corus Entertainment Inc.

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