When government help comes with strings attached
Air Canada has agreed to refund passengers with non-refundable tickets, pledged to restore regional routes and maintain its workforce at current levels in return for a C$5.9 billion ($6.7b) Government loan.
For most of the 2019-20 summer, the airline flew from Vancouver to Auckland four times a week before coronavirus paralysed air travel in March.
Air Canada has refunded more than C$1.2b to customers holding refundable tickets, but as a condition of the loan it is also extending the refund option to all eligible customers with tickets for travel dates on or after February 2020, and who purchased their tickets before this Monday, April 12.
Under the deal, the Canadian Government will extend to the country’s largest airline a variety of low-interest loans worth up to C$5.4b and take an equity stake in the company by purchasing C$500 million in stock in Air Canada, which was fully privatised in 1989.
In this country Air New Zealand, 52 per cent owned by the Government on behalf of taxpayers, has taken a $1.5b backstop loan, but is not refunding non-refundable tickets unless there are compassionate reasons or customers are experiencing financial hardship.
When another $600m was made available last week, shareholding minister Grant Robertson wrote to the airline saying the Government will be an active shareholder, expects it to operate as a good corporate citizen, maintain a comprehensive domestic network and enhance its role in workplace relations. This led to claims by National that the Government was overstepping its arm’s length interest in the airline under the mixed ownership model.
But in Canada the Government has been far more prescriptive with the nation’s airline, which has agreed to restore flights on nearly all suspended regional routes, cap compensation for company executives at C$1m per year and suspend share buybacks and the payment of dividends to shareholders during the period of the loan.
According to broadcaster CBC, Air Canada also said it would maintain its workforce at current levels, respect collective bargaining agreements and protect workers’ pensions.
The company has 14,859 staff, less than half of pre-pandemic numbers.
And customers don’t need to have bought their tickets directly from Air Canada to get a refund. People who booked through third party websites can also get their money back.
In the United States, airlines have been provided more than US$50b in grants, loans and other programmes, while France offered US$12b solely to Air France-KLM.
As part of the latest component of the Air France loan, the airline has been forced to cut domestic flights by 40 per cent in an effort to reduce carbon emissions.
Air Canada flew to New Zealand using a Boeing 787-8 aircraft during its debut summer, in what was seen as the start of a deepening relationship with Star Alliance partner Air New Zealand. The airline is Canada’s largest domestic and international airline and in 2020 was among the 20 largest airlines in the world.