skybluesea

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tcook052

Yes, the same subsidy all other eligible Canadian businesses have received.



Cite? I don't recall AC claiming it hadn't received any aid at all but rather no sector specific aid although you are of course free to correct me if my impression is wholly inaccurate.

yulred

One is free to call a rose by any name they wish (and this includes AC). However, if we go back to basics, this is what we have.

- AC sitting on $1B+ of unrefunded fares (not permissible in comparable jurisdictions).
- The Government permitting AC to withhold these funds while not providing the service
- AC linking refunds to government support, effectively refusing to provide refunds unless the government agrees to guarantee it will reimburse the refunds.

The end result: AC has $1B+ in funds that it should not have (and would not have in other jurisdictions) with the support of the government. More importantly, it is guaranteed to retain this $1B+ regardless of whether the government chooses to intervene or not; refunds are conditional on financial support, which is a nice way of saying the government will pay for them.

Which leads to the following questions:

- Does the Government providing relief on these $1B + of unrefunded fares constitute financial support? (I would argue yes, because if the government went the way of the EU or US, AC would have $0 there, not $1B+. It is a lot of money. And AC only has it by virtue of Government decree. A rose by any other name, IMHO. Happy to hear the other side of the argument)

- Does this constitute sector-specific support? (I’m not really keeping an eye on what other transport companies are doing, but it would either be airline- or travel- or transport-specific, so ... yes?)

And that’s without noting that “sector-specific” financial support is a bit of a red herring. Financial support is financial support. This notion of special conditions for certain sectors, with companies turning down aid that doesn’t meet their conditions, suggests that this “sector-specific financial support” mantra is aimed at addressing “wants” not “needs”.

Just a bit of Occam’s razor. Feel free to take my characterization apart like a cheap piñata.

tcook052

How can CEWS in any way be construed as sector specific support if the same subsidy is available to all other eligible Canadian businesses?

As has already been mentioned but perhaps forgotten or overlooked, this broad business support was meant to preserve jobs rather than give sector specific assistance so unless and until a narrow aviation aid package is announced it's disingenuous to portray readily available government aid as sector specific aid.

YZF_Elite

I suspect that the support doesn't really mean a lot to AC's bottom line. If they hadn't gotten the wage subsidy, the same workers would have been given layoffs. I'm sure they saved something by not doing the layoffs, but at the same time there were probably some costs associated with keeping folks around.

The reality is that the refunds thing sways public opinion, but it probably doesn't matter that much to management since WS customers were also very frustrated for most of the year too and left with a sour taste in their mouths as well. Government money always comes with too many strings and it seems they don't need it at least for now.

yulred

A couple of observations:

1) Flip the argument on its head. If CEWS was only for airlines, would it constitute sector-specific financial support? Therein lies the crux of the issue. It can be portrayed as a general subsidy, sure. It can just as easily be characterized as an airline sector-specific solution that is also being applied to many other sectors. The point is: it’s disingenuous to claim it’s the ‘appropriate’ (for lack of a better word) type of financial support under one set of circumstances (i.e. when only airlines get it) but not when non-airlines get it too.

2) Anyway, perhaps I wasn’t clear, but I wasn’t referring only to CEWS ( which at $500M is a lot less than the $1B mentioned in my post). I was referring to the unrefunded fares - an amount that is basically government guaranteed now because the Government won’t force AC to pay it back without refilling AC coffers. It’s a subsidy in all but name. Or will it only become one when AC refunds all the fares, and the Government tops up AC’s bank account to make up for it? Roses etc.

Anyway, I don’t care much for this notion of repeating “sector-specific” as if it matters. It’s a red herring aimed to at narrowing the frame of reference to support very specific narratives. Unless, of course, one believes that AC would have started refunding passengers if CEWS was aimed at airlines and airlines only.

(Edit: Having reread my post that you quoted, I think it’s quite clear that I was referring to the unrefunded fares and not, as you suggest, CEWS. Bit off an odd straw man, that. Certainly doesn’t align with the $1B+ rough order of magnitude number I was using. Perhaps reread it and then take it apart again?)

skybluesea

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tcook052

If we're being realistic then by that yardstick 355,990 unique applicants that government data show applied for the emergency subsidy as of Nov. 22. received company-specific aid.

YUL

The reason there are sector specific aid to airlines accross the globe is that airlines are amongs the hardest hit by this pandemy - while still being on the hook with extremely high fixed costs (aircraft leases / payments, hangars, maintenance of grounded aircrafts etc)
The current generic federal wage subsidy only covers a very minimal part of those fixed costs.

From a macro-econonic view, why should we have an airline sector specific aid package? If by example Air Canada ceases operation (or is severly restricted in redeploying capacity), a good portion of transborder/international capacity would just be taken over instantly by foreign airlines. This would be a net loss of Canadian jobs that wouldn't be recovered anytime soon - if ever.

Now let's compare that to the hotel sector. They are simillarly hit (85% less sales?), and they are also stuck with somewhat high fixed costs (mortgage payments). If they go bankrupt however, most would just be resold (and would re-open eventually, if not other hotels nearby would take over the clients).
Way less long term negative economic impact compared to the airline sector.

skybluesea

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yulred

What makes government support “sector specific”? Not providing it to other sectors? Or applying specific conditions to make it sufficiently attractive to actors in a specific sector?

Neither makes sense. The former is arbitrary and meaningless. The latter ignores the fact that the Government is the lender of last resort, not the lender of choice. If airlines can get money from other lenders on better terms, more power to them. If they can’t, then they have the choice of accepting Government conditions / equity stakes / whatever, or folding.

Should note that folding isn’t quite as catastrophic as it’s made out to be. Even if an airline were to fold, the infrastructure, equipment, skilled workers etc would continue to - for lack of a better term - live on. The Government could either nationalize the outfit and have it running in no time. Or a Canadian private sector consortium could buy it at a pittance or discounted rate, Let the airline brand go the way of SwissAir, but maintain the airline in all but name.

Yes, shareholders would take a beating; that is inherent in playing the stock market. But it is not the governments job to protect shareholders from their investment decisions. And, as a bonus, this new airline would still be “Canadian”, employing “Canadians”, because that apparently matters (except, of course, when Americans put Canadians out of jobs by adopting the exact same emotive mindset).

It’s why this narrative keeps falling apart. Canada and Canadians don’t need AC or WS. They need air transport. That can be achieved in any number of ways - nationalization, cabotage and everything in between. To put it mildly, the threat COVID poses to airliner shareholders and corporate structures is disproportionately larger than the threat it poses to air transport writ large in Canada. Let’s not conflate the two.

skybluesea

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YUL

This will likely never happen, and you know it.

It did not happen for Aveos by example - despite having the infrastructure, the equipment and the skilled workers. They even had the Air Canada privatization Act to protect them.
Well, it just vanished and all the heavy maintenance contracts moved outside Canada.

Also, do you really believe Westjet (or Transat...) would have the financial means to takeover ALL those TB/Int'l routes (and eqpt, infrastructure) and compete with other airlines - that are currently "better" backed by their governments? Including Delta or particularly United - which is very well aware of Air Canada's transborder routes load factors and what not.

skybluesea

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yulred

“This will likely never happen” strikes me as a poisoned chalice these days. COVID itself might have reasonably fallen under that chapeau in the not-so-distant past . We live in unprecedented times; no reason unprecedented measures shouldn’t follow (they already have - look around).

The Aveos example isn’t a good one. It’s not clear to me that maintaining an engineer base in Canada falls in the same category as maintaining air transport within Canada. Sending an aircraft to Salvador for maintenance to save pennies on the dollar, as AC did, is an altogether different prospect to maintaining air transport within Canada. Unless, of course, we go full cabotage.

The rest simply assumes that one of the incumbents would have to take over AC. Is that necessarily the case. If AC were to fold, it would be an attractive proposition for much bigger fish than WS and TS. Whatever makes it think it’s too big to fail also makes it a very attractive prospect if it does fail. Everything is up and running. Crucially, demand will return to some degree (unlike Aveos). All of which is to say, there will be prospective buyers if any of these airlines were to fail (it’s the “buy cheap” mantra). And if there isn’t, the Government can step in. None of these changes in ownership require disruption in day-to-day operations or losing international market share (other than through poor products or bad service). They will, however, impact shareholders.

This notion that any of these airlines needs to absolutely survive in its current form... doesn’t make much sense. They’re not special in and of themselves. They’re only important insofar as they serve people’s needs. If they fold, those needs will still need to be filled.