Air Canada Deal Sets Bailout Tone

The federal government is back in the airline business with the announcement that it has reached a deal with Air Canada on a bailout package that consists of $5.4 billion in low interest loans that the airline can use to pay down high interest debt and fund operations. As part of the deal the government bought 21.5 million shares in the airline at a 15 percent discount, giving it more than five percent of the company. It also has warrants to boost its stake to about 10 percent and could boost that to 20 percent in the future. The Air Canada deal will likely set the tone for bailout negotiations with other airlines.

That means the feds will likely end up with financial interest in several major carriers and they, too, will have to to meet Ottawa’s bailout terms. Air Canada has agreed to refund customers for COVID-cancelled flights and restore service to smaller communities that were cut for cost savings. WestJet CEO Ed Sims told staff in an internal memo that he was happy the government finally recognized the need to help airlines weather the pandemic but was dismayed with its approach to aid. “…by total contrast to the U.S. or U.K., our government has not taken a sector-wide approach and has instead chosen to negotiate one by one,” he said. Both WestJet and Porter Airlines, who are in talks with Ottawa, are privately held so would need a different kind of deal from Air Canada’s if the feds insist on an ownership stake.