Canada’s Finance Minister delivers Fall Economic Statement stressing government help for airlines will be tied to refunds for cancelled flights

Targeted aid for airports, at first blush, “falls short of what the industry needs to endure this crisis.”

Aviation leaders in Canada were left underwhelmed by the help on offer in the federal government’s Fall Economic Statement. While Finance Minister Chrystia Freeland promised targeted, but unspecified, aid for airports and regional air services, the package fell far short of the rescue the industry has been calling for.

“We had hoped that we were going to see the recognition that a solid and sound aviation sector is critical to our overall economic recovery,” said Mike McNaney, the President and Chief Executive Officer of the National Airlines Council of Canada. The NACC represents Canada’s largest airlines, including Westjet and Air Canada. “We’d hoped to see clarity and get a better understanding of what the process path would be for testing and rapid testing within aviation.”

But realistically, that recognition was lacking. In her speech delivering the Economic Statement, Freeland mentioned airports once. She did not mention the words airlines or aviation at all.

“This is a recession like no other we have faced,” Freeland told the House of Commons Monday. Air carriers report traffic is down 85% from last year, with planes flying less than half full. Tens of thousands of aviation employees have been laid off.

“COVID-19 and related health restrictions have caused Canada’s air sector to suffer a near collapse in passenger travel,” the government acknowledged. “This is threatening the viability of our airlines and airports, and most importantly, the people who work there and the communities that rely on them.”

To that end, the Economic Statement did have some measures to support aviation. It comes on top of $1.4 billion the government said it has provided in wage subsidies to the people who work in aviation.

Help for Canadian airports

Canada’s airports are getting a boost.

“At first blush, this falls short of what the industry needs to endure this crisis but we need to understand how today’s announcement fits into the federal government’s overall plan to support the ongoing viability and competitiveness for Canada’s airports and recovery of our air sector,” said Daniel-Robert Gooch of the Canadian Airports Council. 

Canada’s largest airports are generally run by private, not-for-profit companies. They stand to receive an additional $344 million in support in each of the next two years. To put that amount in context, airports expect to lose $4.5 billion in revenue over the same period.

But that support is heavily skewed toward small airports. It includes $206 million over two years for regional air service development. Earlier this month, Air Canada put 95 route cuts and nine station closures on hold while it waited for details of this program. It has already withdrawn service from eight cities in Eastern Canada as part of its COVID response.

Ottawa is also boosting the Airports Capital Assistance Program by $186 million over the next two years. ACAP helps fund projects at airports handling fewer than 525,000 passengers a year. In the past two years, ACAP has helped fund $58 million in capital projects. They represent everything from a $16,000 new alarm system in Sault Ste. Marie, Ontario to a $12 million pavement overhaul at Fond-du-Lac, Saskatchewan.

While the boost is no doubt welcome, airports have complained for years that ACAP was underfunded. On top of that, 18 small federally-owned airports, which are not currently eligible for ACAP, would be eligible for the next two years. Eleven of those newly-eligible small airports are in Quebec.

Paying the rent

Airports are also benefiting from a rent deferral. The largest airports sit on land owned by the federal government. Airport authorities pay millions in rent for the land – $415 million last year. In March, Ottawa suspended rent payments for the rest of this year.

That will be extended in a variety of formats, depending on the size of the airport. Small airports will see their leases forgiven for the next three years. Since airports pay on a sliding scale, this will have little impact overall. The Canadian Airports Council estimates Ottawa has never collected more than $15 million a year from these facilities.

The next tranche of airports – those serving between one and 10 million passengers – will see their rent forgiven next year. This will help airports ranging from Edmonton at the larger end of the scale to Regina. Last week, Regina’s President and Chief Executive Officer told Western Aviation News he was down to his last million, and had about 45 days of cash in the bank left.

Finally, the four largest airports, Vancouver, Calgary, Toronto, and Montreal will see their 2021 rent deferred for three years and payments spread over 10 years after that.

The government estimates the rent relief at $229 million. They would also be eligible for an unspecified $65 million “in additional financial support” next year, though no details were provided.

The federal government also announced $500 million in funding over the next six years to improve connections at major airports. “Transit projects at large airports, such as the new Réseau Express Métropolitain station at the Montreal Airport, will be eligible for funding,” the government said. Currently, three airports are building, or have plans for, such transit projects: Montreal, Union Station West in Toronto, and a train station in Ottawa.

And what about rapid testing?

Mike McNaney said the country is still at “Stage Zero” when it comes to aviation. Not only has Canada not provided direct help keeping the aviation industry liquid, it has been slow to adopt testing measures. Ottawa has, instead, relied on bans and quarantines to limit the importation of COVID.

The government has yet to signal any change to the policy.

One government-backed testing pilot is under way in Canada, a program for international travellers arriving in Calgary. While Ottawa was a late contributor to a study of arriving passengers in Toronto, the industry has largely been left to develop and fund its own trials.

“We also need to understand the federal government’s plans for COVID-19 testing at airports,” said Daniel-Robert Gooch of the Canadian Airports Council, “which must happen over the next 3-4 months if Canada is to participate in the recovery of global tourism we expect other northern countries will start to see next summer.”

Testing could help governments reduce or eliminate quarantine periods for passengers.

“We had hoped to see a bit more understanding on the plan and path forward on those fronts. We did not,” said McNaney. “The path forward, you’ve seen it in demonstrated by countries all around the world. You address liquidity. You address testing and quarantine measures. And that is how you enable the industry to play the role it has to play.”

A sense of urgency

Ottawa is in discussions with the airlines about providing direct support. The government has already said aid will be tied to providing refunds to passengers whose flights were cancelled due to the pandemic.

Monday’s mini-budget reaffirmed the position.

“The government is establishing a process with major airlines regarding financial assistance,” the government said in budget documents. “As part of this process, the government will ensure Canadians are refunded for cancelled flights.”

“I’m completely devastated and disappointment by this fall economic statement,” said Conservative Transport critic Stephanie Kusie. “It’s always about just enough to survive. I’ll also say that they’re doing this with the airline sector.”

The airlines accept the condition, said McNaney, but time is of the essence.

“We’ve had the fall economic statement,” said the NACC’s McNaney. “We have to get a sense of urgency here.”