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

07:41  13 april  2021
07:41  13 april  2021 Source:   globalnews.ca

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The federal government's nearly $6 billion financial support package for Air Canada announced Monday includes billions of dollars to help the struggling airline rebuild from the effects of the COVID-19 pandemic.

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Among the conditions in the deal are guaranteed refunds for flights cancelled due to the pandemic, along with the restoration of regional routes that were previously suspended and job protection for the airline's remaining employees.

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Here's what travellers need to know about the package.

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

Refunds for cancelled flights

As part of the deal, the Canada Enterprise Emergency Funding Corporation is offering a loan facility of up to $1.4 billion to allow Air Canada to refund travellers whose flights were cancelled due to the pandemic.

Air Canada says customers can apply for those refunds starting April 13.

Under the agreement, refunds will be available for flights purchased on or before Mar. 22, 2020, for travel after Feb. 1, 2020, that were cancelled by either the customer or the airline.

Refunds will also be available for flights purchased after Mar. 22, 2020, that were later cancelled by the airline.

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Travel agents who purchased tickets on customers' behalf can help process those refunds, according to the agreement. However, those agents will still get to keep the commissions they collected from those purchases.

Air Canada told Global News in an email that the refunds will also be available for travellers who used vouchers or Aeroplan points to purchase their tickets.

The airline has been given seven years to repay any loans borrowed from the government refund facility, at an annual interest rate of 1.211 per cent.

According to year-end financial results for 2020, Air Canada made over $2.3 billion in advance ticket sales, including cancelled flights.

Restoring regional service

The agreement with Ottawa also requires Air Canada to restore service to regional connections that were suspended last year and as recently as early 2021.

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The airline must restore service no later than June 1 to regional airports in the following cities:

Bathurst, N.B.;

Comox, B.C.;

Fredericton, N.B.;

Gander, Nfld.;

Goose Bay, Nfld.;

Kamloops, B.C.;

North Bay, Ont.;

Penticton, B.C.;

Prince Rupert, B.C.;

Saint John, N.B.;

Sandspit, B.C.;

Sydney, N.S.; and

Yellowknife, N.W.T.

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

Additionally, Ottawa is requiring Air Canada to reach agreements with other, smaller airlines to help restore routes to regional airports whose services were permanently cancelled due to the pandemic.

Those include the Quebec areas of Gaspé, Baie Comeau, Mont Joli, Val d'Or and the Magdalen Islands, along with Castlegar, B.C., and Wabush, Nfld.

Many of those routes were suspended or cut permanently last summer as Air Canada struggled with plummeting ticket sales due to COVID-19. Service to several additional Atlantic Canada regions and Yellowknife was cancelled this past January.

Job protection

Air Canada has also agreed to not cut any more jobs amid the pandemic, keeping its current workforce of 14,859 active Canadian employees.

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The airline has slashed roughly 25,000 jobs since COVID-19 first began to affect air travel around the world.

Some of those workers have still been paid through the federal government's Emergency Wage Subsidy. Air Canada says it received a gross subsidy of $656 million in 2020, including $586 million in cash payments received.

What about WestJet and other airlines?

Deputy Prime Minister and Finance Minister Chrystia Freeland said during Monday's announcement that conversations between the government and other airlines for similar relief packages are ongoing.

However, she said the $1.4 billion loan facility for refunds will be made available to all airlines "if they would like to work with us to refund their passengers."

Freeland said details on subsequent deals with other airlines will be announced once negotiations are completed.

Is taxpayer money being used to bail out Air Canada?

Freeland was quick to point out that the relief package is not a taxpayer-funded bail-out when asked directly Monday.

Rather, the package includes roughly $4 billion in loans that Air Canada will have to pay back within five to seven years, depending on the credit facility.

Interest rates range from 1.5 per cent to 8.5 per cent, the latter of which increases to 9.5 per cent after five years.

Additionally, the Canada Enterprise Emergency Funding Corporation has made an equity investment of $500 million in Air Canada stock, with shares purchased at a 15 per cent discount -- giving the government a stake in the airline for the first time since it went private in 1989.

Read more: Air Canada optimistic on government aid talks as it posts ‘bleak’ financial results

"Taxpayers aren't footing the bill," Freeland told reporters. "This is a loan facility and the government of Canada fully expects to be paid back."

Air Canada said in its announcement of the agreement that it has raised an additional $6.8 billion in liquidity since the pandemic began last spring.

The airline reported an operating loss of nearly $3.8 billion in 2020, with a $13.3 billion decline in revenue compared to 2019.

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