Airlines

Aviation industry wants to avoid a Hunger Games competition for scarce federal aid

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Associations representing national and regional airlines and airports testify before Commons Transport Committee.

Witnesses present image of an industry with uncertain long-term prospects, while Liberal MP questions airlines’ ‘willingness to demand a blank cheque.’

A Sunwing Boeing 737-800 departs Vancouver International Airport in February 2020 (photo: Brett Ballah).

Leaders of Canada’s aviation industry painted a picture of an industry in turmoil, Thursday, with no clear idea of the way forward or when aid might arrive.

“I think the entire industry is in dire condition,” Mike McNaney, the President and Chief Executive Officer of the National Airlines Council of Canada, told the Commons Transport Committee. The council represents the country’s largest air carriers. “It does seem as we’re looking at different aspects of the aviation community, it is taking a bit of a Hunger Games competition between sizes small and large. And that is not our intent at all.”

Canada’s aviation industry has been decimated by the pandemic. Between 85 and 90% fewer people are flying right now. Borders are largely closed. And just about everyone in the industry is losing money hand over fist.

Federal Finance Minister Chrystia Freeland announced a long-awaited aid package Monday, but with few details. However, she excluded airlines from the package. That decision has left a lot of uncertainty in its wake.

McNaney’s made his comments even as regional airlines issued their own warning to MPs.

“The question that the aviation industry has been asking for so long is, what is government waiting for?” John McKenna testified. McKenna is the head of the Air Transport Association of Canada, an umbrella group representing regional carriers.

McKenna called on the government to work with his members to preserve regional services.

Work with industry

“We fear two things from an airline perspective,” said McKenna. “The first is that the government is simply waiting to see which air carriers survive and perhaps step in to help reestablish lost services, but at a great cost. Our other fear is that government will choose to help only the two largest carriers.”

McKenna expressed frustration with the government’s response to the crisis.

“We wrote letters basically every month since March to the Minister of Transport, Minister of Finance, the Minister of Economic Development, and to the Prime Minister,” McKenna testified. “We have not had any kind of response from any of those letters from anybody.”

The spectre of the larger carrier – particularly Air Canada – loomed large in discussions about regional transportation. Serge Larivière of the Coopérative de transport régional du Québec worried about the conditions attached to federal aid. For instance, Transport Minister Marc Garneau has said regional service would be a priority in any airline package.

But Larivière said forcing Air Canada onto some routes may actually stifle competition, particularly in his home province of Quebec.

“The best thing the government could do would be to maintain healthy market conditions,” he told the committee. “We’re not saying we don’t want Air Canada in our regions, on the contrary. That’s not a problem. But they have to do it without dumping [capacity into the market].”

McNaney warned, however, that the national carriers are facing a bigger threat, and it comes from outside Canada.

“We’re losing market share,” he said, “because as they have received more support, they are able to keep more capacity in the market than Canadian operators are able to do.”

Governments in the United States and Europe have propped up carriers through loans and equity stakes he said, unlike Canadian airliens.

“What we are seeing over time is that they are able to pick up more and more of the capacity of those particular international routes,” he said. “We basically to some degree ceded the playing field to these international operators.” That he warned, is starting to undermine domestic service.

Political turbulence

McNaney reiterated that airlines are calling for low-interst loans and loan guarantees to help tide them through the crisis.

Still, we’re into the 10th month since the pandemic began, and airlines have not received government aid. If there’s a political reason for the hesitation, Liberal MP Chris Bittle gave the best indication.

The airlines left thousands of people out billions of dollars when they cancelled flights because of the pandemic. Instead of offering refunds, they issued travel vouchers, drawing outrage and scorn from affected travellers. Since then, only Westjet has relented. Transport Minister Marc Garneau has made refunds a condition of government aid.

Taking a combative tone with Mike McNaney, Bittle demanded to know if it was reasonable for the government to see the airlines’ books in return for aid. “It seems like there’s a willingness to just demand a blank cheque,” said Bittle.

“Do you think that any financial aid should be tied with restrictions on executive compensation?” he asked.

McNaney replied that the government could impose any conditions it saw fit.

“I’m in an awkward position,” he said. “We are talking about support which is not defined.”

A good first step

The testimony wasn’t all doom and gloom. Daniel-Robert Gooch, the President of the Canadian Airports Council, called the federal aid announced this week “a good first step.”

The government, for instance, announced $500 million over six years for transit infrastructure and similar projects at airports. But Gooch pointed out that wouldn’t even cover the construction of a planned train station at Montreal-Trudeau.

Freeland also announced a boost to funding for capital projects at small airports that serve fewer than 500,000 passengers. The problem is, airports have to spend their own money to apply for the grants. That’s money they don’t have right now as revenues have dried up with the pandemic.

Nor do regional airports have the money to match the grant money they get, usually a condition of getting federal grants.

“They can add all the money they like to the program,” said Brian Grant, Chair of the Regional Community Airports of Canada, “but it it’s not 100% fundable, we can’t access it.”

Grant pointed to numerous expenses, such as automated weather systems, that airports are expected to cover. Realistically, without government aid, their only option is to raise passenger and airline fees.

“The small airports are actually very limited in what they can do going forward,” said Grant. “We have already cut everything to the bare bones. So unfortunately, support is the only answer, I believe.”

Pent up demand

The groups made their plea as Sunwing released a survey suggesting pent up demand for travel in Canada. The travel company said more than half of Canadians would like to receive travel as a gift. The survey of 1,507 Canadians found 55% of respondents would like to receive a gift of travel for some point in the future.

“Our research shows that many Canadians would love to receive the gift of a future vacation experience this holiday season,” said Samantha Taylor, Chief Marketing Officer of Sunwing Travel Group.

Residents of Alberta, British Columbia, and Quebec expressed the most interest. It was not immediately clear what future respondents had in mind as the pandemic continues to ravage travel.

The government of Canada continues to recommend Canadians avoid all non-essential travel outside the country.

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