Civil Aviation: Ottawa to insist on Emergency Credit for Large Employers
Navdeep Bains argues that this program could play a key role in the federal aid plan to pull airlines out of the severe financial crisis caused by the COVID-19 pandemic.
Share November 9, 2020 5:26 p.m. Updated at 8:09 p.m. Share Civil Aviation: Ottawa to insist on Emergency Credit for Large Employers Christopher Reynolds The Canadian Press OTTAWA – Federal Minister of Innovation warns that Emergency Credit for Large Employers , a program that has been completely shunned by the airlines, will still be among the options presented soon by Ottawa to the leaders of this industry hard hit by the pandemic.
Navdeep Bains indicated at a press conference in Ottawa on Monday that this Emergency Credit for Large Employers (CUGE) could play a key role in the federal aid plan to lift airlines out of the serious financial crisis caused by COVID -19.
The federal program offers loans of $ 60 million or more to large companies facing cash flow problems. On the other hand, the CUGE carries an interest rate of 5.0%, which drops to 8.0% after the first year – well above the private sector rates.
According to the Canada Emergency Business Finance Corporation, which administers the program, only two companies have been approved for loans since the Liberals announced CUGE in May: a casino company and a metallurgical coal producer.
Critics have come from across the spectrum, from the federal Conservatives to the national union Unifor, which represents 15,000 workers in the civil aviation industry. We deplore the restrictions of the federal program and its high interest rate.
Transport Minister Marc Garneau said on Sunday that federal aid to airlines will depend on reimbursing passengers for canceled flights, something opposition parties, passenger rights advocates – and thousands of people have long been calling for. complaints to the Canadian Transportation Agency. Minister Garneau said on Sunday that talks with the airlines are expected to begin this week.
The industry has been asking for financial support since the spring, while ruling out certain options, such as government participation in the capital of carriers. The industry would prefer government-guaranteed bank loans, said Robert Kokonis, president of Toronto-based consulting firm AirTrav. “We are ready to take on these debts. We just want to have an interest rate that is much more attractive than that of CUGE. ”
Passenger rights activist Gabor Lukacs, however, believes that Ottawa's stake in carriers like Air Canada is the fairest way for the government to secure a seat on the boards. “The company's ability to repay a secured loan is always a concern – you never know if the debt will be written off somehow,” Lukacs said. As for subsidies, they should be absolutely excluded, he said. “The idea of privatizing profits while nationalizing losses should raise concerns on both sides of the political spectrum.”
John McKenna, CEO of the Air Transport Association of Canada, which represents some 30 regional carriers, is anxiously awaiting federal assistance. “But every time the government tries to please everyone, it ends up pleasing no one,” he says.
Governments around the world have given out $ 123 billion to help the airline industry, according to Unifor President Jerry Dias, who says CUGE “just isn't working” because of “incredible restrictions.”
Canada, on the other hand, was the only G7 country to avoid sectoral aid, opting instead for aid to all businesses in general, such as the Emergency Wage Subsidy. Air Canada, which pleads for sectorial assistance, has also been able to receive about $ 440 million since the establishment of the wage subsidy, according to its quarterly results released Monday.
Until Sunday, Ottawa had also ignored requests from customers wanting reimbursement for flights canceled due to the pandemic – which has saved carriers hundreds of millions of dollars so far.
Meanwhile, European and US authorities have ordered airlines to offer such a refund; At the same time, they have set conditions for their aid measures, which range from limiting dividends and executive bonuses to reducing carbon emissions. In Germany, the government decided to bail out Lufthansa with $ 14 billion, taking a 20% stake in the company.
A few billion dollars in potential refunds to injured travelers remain in the air carriers' coffers. Air Canada announced Monday that as of September 30, “prepaid passenger revenue” totaled $ 2.3 billion – two-thirds of which is for non-refundable tickets. The Montreal-based company also spent $ 9 million per day in cash, for a loss of $ 685 million in the third quarter.
WestJet Airlines, unlike its domestic competitors, announced last month that it would reimburse passengers whose flights it canceled due to the pandemic. The process will likely take six to nine months, it was warned.