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Air Canada

Canadian Government Considers First Airline Bailout Package

Canadian Government Considers First Airline Bailout Package
Joe Cortez

While U.S.-based carriers are fighting for additional funds to address shortcomings, the Canadian parliament is considering extending their first bailout package to their carriers. The debate is now over whether or not the government will offer around $5.35 billion USD in low-interest loans.

The Canadian parliament may offer a COVID-19 bailout package to Air Canada, WestJet and other carriers, in the form of low-interest loans payable over 10 years. Reuters reports the government may be debating extending around $5.35 billion USD ($7 billion CAD) in loans to air carriers.

Debate Between Loans or Taking Equity Stakes in Carriers

Since the beginning of the COVID-19 Pandemic, Canadian airlines have been asking their government for a bailout package, similar to the CARES Act. The American government bailout offered a combination of grants and loans to U.S.-based air carriers, some of which was used to pay employees through Sept. 30, 2020.

While the Canadian government has resisted the idea of offering funds, those inside Parliament Hill told Reuters: “We’re running out of runway on this.” There are two packages reportedly being considered, each of which could affect the direction of carriers for the conceivable future.

The first plan is to offer an approximate $5.35 billion in low-interest, 10-year loans. While Canadian labor unions are a fan of a loan package, those with knowledge of the plan have not committed to specific terms.

In the other plan, the Canadian government would take an equity stake in the carriers accepting bailout money, which is similar to the CARES Act approach. Each American carrier who accepted funds from the U.S. Treasury issued warrants to allow the government to purchase airline shares. According to insiders, this plan isn’t particularly popular among either airlines or the government.

While the airlines have accepted subsidies from the Canadian government, this would be the first bailout package to directly inject cash into the airlines. With Air Canada laying off half of their workforce, those working in the industry say it’s direly needed to keep aviation viable in the nation.

While Canada Debates, America Waits

Although Canadian lawmakers are debating what a bailout package would look like, a phase four airline bill remains stalled in Congress. But with the election coming to a close, current U.S. Senate majority leader Mitch McConnel suggested that another stimulus bill should be considered before the end of 2020.

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