AC rules out 'colossal failure' of government stake for aid; bailout debate thread
Dec 8, 2020, 6:55 pm
#47
Join Date: Jan 2016
Location: YYZ
Programs: Only J via Peasant Points, 777HDPeasant or The Unexpected Virtue of Ignorance and Narcissism.
Posts: 5,951
Here are my takes on why Airlines should not get special treatments
- We risk create an asymmetric relationship where we are in for all of the losses and zero part of the gains. Govt should only be be last line of defence when it comes to Capital Raise and we would need to take signficant stakes (like Warren Buffet type of dividend payback schedule). If we bail out airline only, what about the hotel business and so on? Airline bankruptcy is not the end of world, it will rather present a more workable capital structure coming out of COVID.
- Airlines in US have been effectively bankrolled by US Govt, I suspect we will see the negative consequence it will have on the market dynamic for years to come.
- Outside of the US, most of the govt support has been due to the fact airlines themselves were not able to raise sufficient capital at acceptable rates (for example - Air New Zealand, Cathay)
- UK's stance here: https://news.sky.com/story/coronavir...esort-11963039
- We risk create an asymmetric relationship where we are in for all of the losses and zero part of the gains. Govt should only be be last line of defence when it comes to Capital Raise and we would need to take signficant stakes (like Warren Buffet type of dividend payback schedule). If we bail out airline only, what about the hotel business and so on? Airline bankruptcy is not the end of world, it will rather present a more workable capital structure coming out of COVID.
- Airlines in US have been effectively bankrolled by US Govt, I suspect we will see the negative consequence it will have on the market dynamic for years to come.
- Outside of the US, most of the govt support has been due to the fact airlines themselves were not able to raise sufficient capital at acceptable rates (for example - Air New Zealand, Cathay)
- UK's stance here: https://news.sky.com/story/coronavir...esort-11963039
Dec 8, 2020, 7:01 pm
#48
Join Date: Jan 2016
Location: YYZ
Programs: Only J via Peasant Points, 777HDPeasant or The Unexpected Virtue of Ignorance and Narcissism.
Posts: 5,951
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.
1. Virgin Australia has shown that decent sized airline business would see suitors. I doubt if Sunwing, AC goes under there would not be a public-private partnership that would resolve it without major disruption to public
2. I don't see the argument for long term negative economic impact vs hotel, demand should bounce back around the same time for both sectors. In fact - probably sooner for Airlines given the fact ppl want to visit their familes. Airplanes can be deployed anywhere, you cant just lift up a hotel to a higher demand areas.
Dec 8, 2020, 7:18 pm
#49
Moderator, Air Canada; FlyerTalk Evangelist
Join Date: Feb 2015
Location: YYC
Programs: AC SE MM, FB Plat, WS Plat, BA Silver, DL GM, Marriott Plat, Hilton Gold, Accor Silver
Posts: 16,760
This thread is quickly wandering off topic.
Please keep discussion to AC and potential government support for the Canadian industry that would include AC.
A more general discussion of airline bail-outs belongs in the master COVID forum or OMNI/PR.
Adam Smith
AC Forum Co-Moderator
Please keep discussion to AC and potential government support for the Canadian industry that would include AC.
A more general discussion of airline bail-outs belongs in the master COVID forum or OMNI/PR.
Adam Smith
AC Forum Co-Moderator
Dec 9, 2020, 1:43 pm
#50
Suspended
Join Date: Sep 2014
Programs: AC SE100K-1MM, NH, DL, AA, BA, Global Entry/Nexus, APEC..
Posts: 18,877
I am hoping the rulers of FT allow the full post to remain as this letter provides an interesting perspective. He references Air Canada and their situation numerous times and points out some "math" re the pilots for eg.. It may or may not sway any of the views in this thread, but I always welcome additional voices and different experiences.
Gilles is an A330/A321 Captain. He posted this letter to the CBC on his LinkedIn page. https://www.linkedin.com/pulse/my-re...les-hudicourt/
NOTE: Mods are free to edit
*****
From: Gilles Hudicourt
Sent: 8 décembre 2020 12:14
To: '[email protected]'
Subject: As passengers pushed for refunds, Air Canada got more than $400 million from wage subsidy
Dear Mrs Burke,
I assume that by now, after reading the comments under your article, you must be aware that many people in the aviation industry were shocked by your recent article, “As passengers pushed for refunds, Air Canada got more than $400 million from wage subsidy”. To describe the money collected by airline employees through the CEWS program as money “tapped by the airlines” is not just a stretch of truth, it is plainly false. The CEWS program was set up primarily to help employees, relieve the EI and keep un-employment numbers down on paper. Helping the employers was only a secondary role, which in the case of airlines was a very very minor one.
To illustrate my point, let’s take the case of two Canadian airlines, Porter and Sunwing. Both ceased operations completely in April 2020. Porter has still not resumed operations, whereas Sunwing did a few token flights, but still has 99% of its aircraft grounded. Both laid off all of their staff, save for a minute number of administrative and technical staff to keep the companies alive on paper. Normally all of their laid-off staff would have gone on EI. But when the Government proposed the CEWS (that was to pay 75% of the salary up to a certain cap), it allowed for the companies to put their laid off employees on CEWS without having to make them work, without having to pay their share of the salary, and the greatest advantage of all to the employees, is that laid off employees who were on CEWS could work elsewhere, if they were able to find work, without penalty, while still collecting the CEWS.
The CEWS was labelled as 75% of the salary but it was capped at $847 a week. So a pilot normally earning $100,000 ($1923/week gross) would only collect $847/week on CEWS (it was net but sometimes insurance, union dues etc were collected).
However, unlike EI, CEWS was not paid directly to the employee. It was paid to the airlines, which passed it on to the employee as “salary”. But this salary was not, in the case of airlines that had ceased operations, paid for any work that the employee did for the airlines. It was paid up front by the airlines to the employees as "salary" and was refunded by the Government about six weeks later, in exchange for zero work done. But the Liberal Government wants to pass this money off as "financial aid provided to the airlines". The laid off employees of a shut down airline collecting CEWS while sitting at home were technically still considered “employed” and thus not increasing the un-employed statistics, were not appearing as people collecting EI, which they certainly would have been otherwise. But that CEWS money was providing no financial relief whatsoever to the balance sheets of the airlines. When members of the Liberal Government of Canada try to portray the CEWS program as "financial help" to the airlines, it is pure demagogy.
But not all airlines shut down completely for the whole duration since the crisis began. My employer, for example, shut down completly for almost four months but at the end of July timidly began a very reduced flight schedule, which it had to curtail later in the summer when the Government kept extending the travel restrictions. Most of my company’s employees were laid off in April and many were subsequently put on CEWS although they were at home not doing any work. The minority of the administrative employees and a core of technical staff that remained at work during the shut down collected CEWS as well, and it is only the CEWS collected by those working employees which can be considered as Government money having been to the financial benefit of the airline. But this is a very minute proportion of the overall CEWS expenditure to the airline employees.
When a number of employees were recalled to work in July, they were back on payroll and went back to their regular pay. Part of their wage continued to be subsidized by CEWS, which helped the company, there no doubt about it, but the vast majority of the employees collecting CEWS were those who were at home, not working, and who would have been collecting EI otherwise. So the CEWS collected by these employees who are at home and are not working cannot count as financial help to the airlines.
In the case of Air Canada, which your article featured as one of the major abusers of the system, there again there is much disinformation, if not outright lies, furnished by members of the Liberal Government of Justin Trudeau (Transport Minister Marc Garneau, Finance Minister Christia Freeland, the Parliamentary Secretary of the Minister of Transport, Chris Biddle, and by the PM himself, Justin Trudeau).
Air Canada laid off 20,000 of its 38,000 employees. However, their passenger numbers are down by 90% and barely15% of their aircraft are flying. You will agree, I assume, that they kept on payroll much more employees than they actually need to run the operation as it now stands?
If you look at their 2019 financial results, you will see that Air Canada paid $3.2 billion dollars in salaries and benefits that year. They still have 45% of their staff, and although many took reduced hours to help the company, the senior staff that remains employed are the better paid ones, so we can assume that the payroll that Air Canada still has to pay is at least 50% of the 2019 figure. Let’s call it $1.6 billion in salaries. The company has been bleeding money for 9 months with very little income from mostly empty flights.
So yes, Air Canada “collected” $492 million from CEWS, but had the CEWS program not existed, many of those employees that Air Canada kept on payroll but does not need right now, would have been laid off and sent on EI. I know of Air Canada pilots who are on payroll and who have not touched the controls of an aircraft since March 2020. Air Canada is just hanging on to them to they don’t disappear to China before this crisis ends and when they will once again be needed in Canada. Pilots cannot be replaced overnight.
Air Canada alone owes $2.3 billion to its customers in unused tickets. All the other Canadian airlines owe much money to their customers as well. The Government of other countries in the World came to the rescue of their airlines with low interest loans, and it is thanks to those loans that these airlines were able to refunds their customers. They would not have been able to do so otherwise.
What makes the members of this Canadian Government think that Canadian airlines would be the only airlines in the World to be able to refund their customers without Government assistance ? There is a word for it: Demagogy.
List of Governments that provided financial aid to their airlines:
Australia, Austria , Belgium, Colombia, Finland, France, Germany, India, Indonesia, Ireland, Israel, Italy, Hong Kong, Japan, Latvia, Mauritius, Morocco, Netherlands, New Zealand, Norway, Portugal, Qatar, Russia, Singapore, Spain, South Korea, Sweden, Switzerland, United Arab Emirates, United States of America.
The total amount in aid provided by these countries to their respective airlines comes out to $170 Billion US dollars. Canada is claiming that CEWS paid to airlines worker, the bulk of which went directly to the pockets of inactive aviation workers who would have otherwise been on EI, or even on welfare soon, amounts to Financial assistance meant to help the airlines.
How can CEWS, by going straight to employees, help airlines survive this pandemic, survive the crippling restrictions on travel imposed by the Government, survive the Governments’ inaction on coming up with a plan to get this country’s airlines out of this mess, which as I write these worlds, has no end in sight? How is CEWS going to help these airlines after they have gone bankrupt? How is CEWS going to help the Canadian public get reimbursed for their tickets after the airlines have gone bankrupt?
Incompetence, indecisiveness, hot air, talk, and demagogy. This is how I can best describe the Governments’ policies for Canadian Aviation since this crisis began.
Gilles Hudicourt
Montreal
#SaveCanadianAviation
Gilles is an A330/A321 Captain. He posted this letter to the CBC on his LinkedIn page. https://www.linkedin.com/pulse/my-re...les-hudicourt/
NOTE: Mods are free to edit
*****
From: Gilles Hudicourt
Sent: 8 décembre 2020 12:14
To: '[email protected]'
Subject: As passengers pushed for refunds, Air Canada got more than $400 million from wage subsidy
Dear Mrs Burke,
I assume that by now, after reading the comments under your article, you must be aware that many people in the aviation industry were shocked by your recent article, “As passengers pushed for refunds, Air Canada got more than $400 million from wage subsidy”. To describe the money collected by airline employees through the CEWS program as money “tapped by the airlines” is not just a stretch of truth, it is plainly false. The CEWS program was set up primarily to help employees, relieve the EI and keep un-employment numbers down on paper. Helping the employers was only a secondary role, which in the case of airlines was a very very minor one.
To illustrate my point, let’s take the case of two Canadian airlines, Porter and Sunwing. Both ceased operations completely in April 2020. Porter has still not resumed operations, whereas Sunwing did a few token flights, but still has 99% of its aircraft grounded. Both laid off all of their staff, save for a minute number of administrative and technical staff to keep the companies alive on paper. Normally all of their laid-off staff would have gone on EI. But when the Government proposed the CEWS (that was to pay 75% of the salary up to a certain cap), it allowed for the companies to put their laid off employees on CEWS without having to make them work, without having to pay their share of the salary, and the greatest advantage of all to the employees, is that laid off employees who were on CEWS could work elsewhere, if they were able to find work, without penalty, while still collecting the CEWS.
The CEWS was labelled as 75% of the salary but it was capped at $847 a week. So a pilot normally earning $100,000 ($1923/week gross) would only collect $847/week on CEWS (it was net but sometimes insurance, union dues etc were collected).
However, unlike EI, CEWS was not paid directly to the employee. It was paid to the airlines, which passed it on to the employee as “salary”. But this salary was not, in the case of airlines that had ceased operations, paid for any work that the employee did for the airlines. It was paid up front by the airlines to the employees as "salary" and was refunded by the Government about six weeks later, in exchange for zero work done. But the Liberal Government wants to pass this money off as "financial aid provided to the airlines". The laid off employees of a shut down airline collecting CEWS while sitting at home were technically still considered “employed” and thus not increasing the un-employed statistics, were not appearing as people collecting EI, which they certainly would have been otherwise. But that CEWS money was providing no financial relief whatsoever to the balance sheets of the airlines. When members of the Liberal Government of Canada try to portray the CEWS program as "financial help" to the airlines, it is pure demagogy.
But not all airlines shut down completely for the whole duration since the crisis began. My employer, for example, shut down completly for almost four months but at the end of July timidly began a very reduced flight schedule, which it had to curtail later in the summer when the Government kept extending the travel restrictions. Most of my company’s employees were laid off in April and many were subsequently put on CEWS although they were at home not doing any work. The minority of the administrative employees and a core of technical staff that remained at work during the shut down collected CEWS as well, and it is only the CEWS collected by those working employees which can be considered as Government money having been to the financial benefit of the airline. But this is a very minute proportion of the overall CEWS expenditure to the airline employees.
When a number of employees were recalled to work in July, they were back on payroll and went back to their regular pay. Part of their wage continued to be subsidized by CEWS, which helped the company, there no doubt about it, but the vast majority of the employees collecting CEWS were those who were at home, not working, and who would have been collecting EI otherwise. So the CEWS collected by these employees who are at home and are not working cannot count as financial help to the airlines.
In the case of Air Canada, which your article featured as one of the major abusers of the system, there again there is much disinformation, if not outright lies, furnished by members of the Liberal Government of Justin Trudeau (Transport Minister Marc Garneau, Finance Minister Christia Freeland, the Parliamentary Secretary of the Minister of Transport, Chris Biddle, and by the PM himself, Justin Trudeau).
Air Canada laid off 20,000 of its 38,000 employees. However, their passenger numbers are down by 90% and barely15% of their aircraft are flying. You will agree, I assume, that they kept on payroll much more employees than they actually need to run the operation as it now stands?
If you look at their 2019 financial results, you will see that Air Canada paid $3.2 billion dollars in salaries and benefits that year. They still have 45% of their staff, and although many took reduced hours to help the company, the senior staff that remains employed are the better paid ones, so we can assume that the payroll that Air Canada still has to pay is at least 50% of the 2019 figure. Let’s call it $1.6 billion in salaries. The company has been bleeding money for 9 months with very little income from mostly empty flights.
So yes, Air Canada “collected” $492 million from CEWS, but had the CEWS program not existed, many of those employees that Air Canada kept on payroll but does not need right now, would have been laid off and sent on EI. I know of Air Canada pilots who are on payroll and who have not touched the controls of an aircraft since March 2020. Air Canada is just hanging on to them to they don’t disappear to China before this crisis ends and when they will once again be needed in Canada. Pilots cannot be replaced overnight.
Air Canada alone owes $2.3 billion to its customers in unused tickets. All the other Canadian airlines owe much money to their customers as well. The Government of other countries in the World came to the rescue of their airlines with low interest loans, and it is thanks to those loans that these airlines were able to refunds their customers. They would not have been able to do so otherwise.
What makes the members of this Canadian Government think that Canadian airlines would be the only airlines in the World to be able to refund their customers without Government assistance ? There is a word for it: Demagogy.
List of Governments that provided financial aid to their airlines:
Australia, Austria , Belgium, Colombia, Finland, France, Germany, India, Indonesia, Ireland, Israel, Italy, Hong Kong, Japan, Latvia, Mauritius, Morocco, Netherlands, New Zealand, Norway, Portugal, Qatar, Russia, Singapore, Spain, South Korea, Sweden, Switzerland, United Arab Emirates, United States of America.
The total amount in aid provided by these countries to their respective airlines comes out to $170 Billion US dollars. Canada is claiming that CEWS paid to airlines worker, the bulk of which went directly to the pockets of inactive aviation workers who would have otherwise been on EI, or even on welfare soon, amounts to Financial assistance meant to help the airlines.
How can CEWS, by going straight to employees, help airlines survive this pandemic, survive the crippling restrictions on travel imposed by the Government, survive the Governments’ inaction on coming up with a plan to get this country’s airlines out of this mess, which as I write these worlds, has no end in sight? How is CEWS going to help these airlines after they have gone bankrupt? How is CEWS going to help the Canadian public get reimbursed for their tickets after the airlines have gone bankrupt?
Incompetence, indecisiveness, hot air, talk, and demagogy. This is how I can best describe the Governments’ policies for Canadian Aviation since this crisis began.
Gilles Hudicourt
Montreal
#SaveCanadianAviation
Dec 14, 2020, 1:03 pm
#52
Join Date: Dec 2002
Posts: 8,001
Airbus has an opinion too.
https://www.bnnbloomberg.ca/lack-of-...-ceo-1.1536358
The head of Airbus SE said he’s disappointed Canada is not doing enough to prop up its aerospace industry as the sector continues to struggle with the fallout from the COVID-19 pandemic.
https://www.bnnbloomberg.ca/lack-of-...-ceo-1.1536358
The head of Airbus SE said he’s disappointed Canada is not doing enough to prop up its aerospace industry as the sector continues to struggle with the fallout from the COVID-19 pandemic.
Dec 26, 2020, 2:19 pm
#53
A FlyerTalk Posting Legend
Original Poster
Join Date: May 2002
Location: YEG
Programs: HH Silver
Posts: 56,446
https://www.thestar.com/business/202...bal-peers.html
The Faceoff: Ottawa vs. Air Canada. The government’s delay in bailing out Canadian airlines could result in Air Canada being permanently less competitive than its peers
The Faceoff: Ottawa vs. Air Canada. The government’s delay in bailing out Canadian airlines could result in Air Canada being permanently less competitive than its peers
Dec 26, 2020, 5:08 pm
#54
Join Date: Apr 2016
Posts: 296
Originally Posted by Toronto Star
For several months, Air Canada and WestJet have been issuing cash refunds on selected flights and travel packages cancelled by the pandemic. But only with adequate federal assistance can they provide cash refunds for every cancelled flight.
But investors in bailout recipients Delta Air Lines Inc. and Deutsche Lufthansa AG have seen their stock drop by only 34 per cent and 39 per cent this year, respectively. By contrast, AC stock has lost 56 per cent of its value. It would be trading lower still if not for investor expectations that Ottawa ultimately will come to the airlines’ rescue.
Last edited by tecate55; Dec 26, 2020 at 5:18 pm
Jan 6, 2021, 11:27 am
#55
Join Date: Feb 2020
Posts: 1,203
I wonder if all the bad press we've seen lately about AC will affect its position in negotiations seeking government financial aid. The government will have to be careful about the perception on such aid in the public' opinion's view.
(I'm highlighting the "financial aid" part to show that I'm not off-topic, as it is the subject of this thread)
(I'm highlighting the "financial aid" part to show that I'm not off-topic, as it is the subject of this thread)
Last edited by hoipolloi; Jan 6, 2021 at 11:46 am
Jan 14, 2021, 11:05 am
#56
Join Date: Feb 2020
Posts: 1,203
Stand-off around refunds in financial support package negotiations
This new CBC article questions whether the recent AC route cuts are being used as a bargaining chip to force the government's hand. It implies that there's a major standoff linked to passenger refunds in the negotiations between the government and airlines for financial aid.
https://www.cbc.ca/news/business/air...ysis-1.5870690
https://www.cbc.ca/news/business/air...ysis-1.5870690
Playing a strategic game
In Europe, governments have already offeredairlines tens of billions of dollars in bailout money to help them survive the financial impact of travel bans and lockdowns.
And while Canadian airlines have been able to take advantage of the same subsidies available to other struggling businesses, LaBarge said a bigger bailout package specifically for airlines has been held up by a dispute over where the money will go.
"The airlines and governments and consumer groups to some extent have been in a bit of a standoff as consumers are waiting for refunds for flights they were not able to take," said LaBarge.
In Europe, governments have already offeredairlines tens of billions of dollars in bailout money to help them survive the financial impact of travel bans and lockdowns.
And while Canadian airlines have been able to take advantage of the same subsidies available to other struggling businesses, LaBarge said a bigger bailout package specifically for airlines has been held up by a dispute over where the money will go.
"The airlines and governments and consumer groups to some extent have been in a bit of a standoff as consumers are waiting for refunds for flights they were not able to take," said LaBarge.
Last edited by tcook052; Jan 15, 2021 at 1:37 pm Reason: FT Rules on copyright
Feb 4, 2021, 3:22 pm
#57
Suspended
Join Date: Sep 2014
Programs: AC SE100K-1MM, NH, DL, AA, BA, Global Entry/Nexus, APEC..
Posts: 18,877
Trudeau says airlines will survive, Atlantic region frets about route cuts
CTV News - Thursday, February 4, 2021 4:25PM EST
QUOTE:
"OTTAWA -- Canadian Prime Minister Justin Trudeau on Thursday insisted Ottawa would ensure airlines survived the COVID-19 pandemic even as industry advocates said that without a promised aid package many routes would die, crippling the economy.
Air travel is critical for Canada, the second largest country by area and one which stretches across six time zones. For many communities, flights are the only reliable option.
The government and major airlines such as Air Canada and WestJet have been in talks for months about an aid package but insiders say the negotiations are going slowly."
Full article
https://www.ctvnews.ca/politics/trud...cuts-1.5296128
CTV News - Thursday, February 4, 2021 4:25PM EST
QUOTE:
"OTTAWA -- Canadian Prime Minister Justin Trudeau on Thursday insisted Ottawa would ensure airlines survived the COVID-19 pandemic even as industry advocates said that without a promised aid package many routes would die, crippling the economy.
Air travel is critical for Canada, the second largest country by area and one which stretches across six time zones. For many communities, flights are the only reliable option.
The government and major airlines such as Air Canada and WestJet have been in talks for months about an aid package but insiders say the negotiations are going slowly."
Full article
https://www.ctvnews.ca/politics/trud...cuts-1.5296128
Feb 5, 2021, 6:46 am
#58
Join Date: Feb 2020
Posts: 1,203
No refunds without a bailout, Air Canada executive says
“From the outset we complied with the order of the Canadian Transport Agency,” Mr. Rheault told the House of Commons transportation committee. “If we get some aid from the government, we’ll be able to refund” the fares.
https://www.theglobeandmail.com/busi...xecutive-says/
misleading, because AC changed its refund policy before the CTA came out with its statement on vouchers
Last edited by hoipolloi; Feb 5, 2021 at 8:59 am
Feb 5, 2021, 8:11 am
#59
Moderator, Air Canada; FlyerTalk Evangelist
Join Date: Feb 2015
Location: YYC
Programs: AC SE MM, FB Plat, WS Plat, BA Silver, DL GM, Marriott Plat, Hilton Gold, Accor Silver
Posts: 16,760
Also misleading because Air Canada has billions of cash sitting around and could easily afford to refund every single flight it had cancelled and still have billions of cash sitting around.
Feb 5, 2021, 4:40 pm
#60
Join Date: Apr 2015
Location: YVR
Programs: UA Premier Platinum
Posts: 3,759
I'll admit I haven't followed this issue closely in recent months so correct me if anything below is wrong.
CTA did not issue an "order" (AC's words) on any specific dispute in its role as a quasi-judicial administrative tribunal but rather a "statement" in its role as regulator. AC makes it seem as if CTA ordered them not to refund when CTA merely stated its view that vouchers, in general, could be acceptable without prejudice to any particular passenger's claim for refund.
Being that it's now been about a year since the initial wave of flight cancellations, has the CTA actually ruled on any consumer complaints regarding refunds? The last I recall was that the Federal Court had the issue back to the CTA?
CTA did not issue an "order" (AC's words) on any specific dispute in its role as a quasi-judicial administrative tribunal but rather a "statement" in its role as regulator. AC makes it seem as if CTA ordered them not to refund when CTA merely stated its view that vouchers, in general, could be acceptable without prejudice to any particular passenger's claim for refund.
Being that it's now been about a year since the initial wave of flight cancellations, has the CTA actually ruled on any consumer complaints regarding refunds? The last I recall was that the Federal Court had the issue back to the CTA?