Hurry up, airlines say, as Trudeau prepares aid package

For airlines caught in the eye of the new coronavirus storm, Canada’s second fiscal act can’t come soon enough.

Prime Minister Justin Trudeau’s government promised that a plan to help the industry would follow an $82-billion aid package announced earlier this week. Airlines say he’d better hurry. Providing too little money, too late could prove fatal for some.

“If nothing happens in the next couple of weeks we’re going to see some people shut down,” permanently, said John Mckenna, president of the Air Transport Association of Canada, which represents some smaller carriers including Porter Airlines and Sunwing Vacations.

“What we need is a cash inflow.” His request echoes pleas from airlines around the world as carriers cut routes and staff to survive.

From Asia to North America, the industry may need as much as US$200 billion to weather the pandemic, according to the International Air Transport Association. The U.S. Treasury will propose lending airlines US$50 billion, according to a document obtained by Bloomberg.

In Canada’s vast territory, the $26-billion industry lives off business travellers who need to get around and consumers looking to escape the harsh winters. Now airlines are drastically curtailing or suspending operations to respond to government decisions to tighten the border and discourage Canadians from travelling abroad.

Air Canada, by far the largest, said Wednesday it will gradually suspend most international and U.S. flights while serving a reduced domestic network.

Two days earlier, it announced cost-cutting measures and called on the government to help through forbearance of taxes, landing fees and other charges.

Up until this year, the stock had been among the 10 best-performing in Canada’s benchmark equity index over the previous decade.

It has lost about 75 per cent of its value since a peak in January.

Some airlines are more concerned with survival than taxes, said Mckenna. Westjet Airlines Ltd., Porter and Transat A.T. Inc. are laying off staff as they stop flying Canadians out of the country or suspend operations entirely.

Finance Minister Bill Morneau said in an interview with BNN Bloomberg TV that he knows there are immediate cash flow problems in the airline and oil sectors and said the government will take “additional measures” soon. “We will be refining what we’ve done, we will be thinking about next steps.”

Earlier this week, Morneau touted “a tailored set of tools” being developed by the nation’s export credit agency and the federal development bank for the airline and oil industries.

Trudeau said measures could also include the Canada account. That’s the instrument the government used for its contribution to the bailout of General Motors and Chrysler more than a decade ago.

A rescue package for all Canadian airlines could require as much as $10 billion, said John Gradek, a former Air Canada executive who teaches at Mcgill University’s Global Aviation Leadership Program. He says $5 billion would be acceptable, provided not all of it goes to Westjet and Air Canada.

If nothing happens in the next couple of weeks we’re going to see some people shut down (permanently).