Negotiations continue on support for Canada’s airline, aerospace industry; ‘no conclusion’ on what an outcome will look like

Avatar for Ken PoleBy Ken Pole | February 3, 2021

Estimated reading time 7 minutes, 48 seconds.

Three months ago, the Canadian government confirmed it was working on ways to help airlines, airports, and the aerospace industry as they struggled with the impact of COVID-19. Companies were burning through cash to maintain grounded fleets, layoffs and furloughs were endemic, and the route ahead was extremely turbulent.

“The air sector cannot respond to these challenges on its own,” then Transport Minister Marc Garneau said. “The government . . . is developing a package of assistance.”

Government support for Canada’s airlines was tied to a call for carriers to issue cash refunds, rather than vouchers, to passengers who had to cancel trips.

Garneau said financial assistance “could include loans and potentially other support.” However, it was tied to a call for carriers to issue cash refunds, rather than vouchers, to passengers who had to cancel trips.  “Before we spend one penny of taxpayer money on airlines, we will ensure Canadians get their refunds.”

The commitment was reiterated in the government’s Nov. 30 Fall Economic Statement, but those refunds had become – and some apparently still are – a sticking point in negotiations. That prompted the International Air Transport Association (IATA) to express frustration toward the evident lack of progress.

“The government . . . has failed to deliver,” said IATA’s regional vice president for the Americas, Peter Cerdá. “Other governments see the need for financial support as an investment in economic recovery and have supported the industry with US$173 billion.”

Cerdá noted that Canada had already implemented “some of the most draconian COVID-19 measures which have essentially shut down most air connectivity and put the sector in a tailspin.” That was exacerbated when the government persuaded Air Canada, WestJet, Sunwing, and Air Transat to “voluntarily” shut down flights to the Caribbean and Mexico, effective Jan. 31.

Air Canada president and CEO Calin Rovinescu said the impact on the company’s “cash burn” was incremental and “not material, given the already reduced levels of passenger traffic” due to COVID-19. He also said booked passengers would be offered refunds.

His WestJet counterpart, Ed Sims, while acknowledging the government’s “precautionary” approach, pointed out that air travel had accounted for less than two percent of COVID-19 cases since the pandemic began. “Well over 90 percent, in fact, are connected to land borders.” 

However, travel to and through the U.S., was still permitted. Garneau’s successor in a Jan. 12 cabinet shuffle, Omar Alghabra, was asked about the mixed message that evening in an interview on the CBC News Network. Power & Politics host Catherine Cullen asked why the government had not banned travel to all sunshine destinations.

Alghabra said that would have “a detrimental impact on a lot of our supply chain, on a lot of our essential workers, on a lot of cargo that includes vaccines, that includes equipment that we need.”

Pressed on the issue, he said “promotion of sun destinations is part of the conversations we’re having with airlines.” Asked whether the government had made its promised support for carriers contingent on straightforward refunds, Alghabra reiterated that the latest restrictions added “extra pressure” on the carriers. “We are taking into account these extra measures into the negotiations, but there is no conclusion to . . . what the outcome is going to look like.”

Meanwhile, the House of Commons committee that handles transport issues has been hearing dire warnings by an array of witnesses that the aviation sector’s basic survival is threatened.

Mike Mueller, interim president and CEO of the Aerospace Industries Association of Canada, said its members have lost more than 40 percent of revenues, and that nearly all have reported various levels of shutdowns, including more than half having laid off workers.

He said that with broad government support decades ago, Canada’s aerospace sector evolved into one of the most vigorous in the world, “but in recent years that vision, investment, and support has been slipping – and so has Canada’s global positioning.” Calling for immediate government support, he pointed out that competitors such as the U.S., France, and Germany had spent billions on support for carriers and affiliated companies. Moreover, those other countries were “actively soliciting Canadian firms to shut down and move,” and “once these jobs leave, they don’t come back.”

Mueller also said that while measures such as $1.5 billion in short-term financial benefits were “appreciated and helpful, they’re just not enough.” That was echoed by Derek Ferguson, the International Association of Machinists and Aerospace Workers’ (IAMAW) political action lead.

Adding that some 10,000 IAMAW members are out of work, Ferguson said, “Any support must be worker-centric” because “if there are no workers left in this industry when the pandemic eases, then there will be no industry.”

He called for “comprehensive and sound policy” to ensure the long-term viability of all carriers, noting that “the union has been pressing for a national labor strategy in both aerospace and air transportation . . . to enhance education and training of the next generation of workers.”

Rob Giguere, CEO of the Air Canada Pilots Association, said its active roster had fallen to 3,800 pilots from a pre-pandemic 4,500, just as Air Canada was about to hire 900 more. 

 “Other countries are now in their second and third round of direct financial support for their airlines,” he added. “We’re the only G7 country that has not received specific industry aid. . . . Many jobs have been lost and some of those losses may never be recovered. If we don’t receive assistance soon, Canada may not have an airline industry by the time the recovery comes.”

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