Airlines COVID-19 rescue negotiations at critical stage, sources say

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The federal government and Canada’s airlines are at a critical stage in backroom negotiations that could soon end months of haggling and result in a multibillion-dollar rescue plan for the pandemic-hobbled industry.

Michael Sabia, the veteran corporate executive recently recruited as deputy minister of finance, is close to finalizing a bailout package, according to one government and three industry sources briefed on the talks.

The Globe and Mail is not identifying the sources because they were not authorized to discuss the negotiations.

Talks between Mr. Sabia and the industry have been going on for weeks, with all the participants signing non-disclosure agreements as Finance Department officials delved deeply into the financial records of airlines both big and small.

Sabia has a big bridge to build between airlines and government – and it starts with trust

One of Canada’s biggest business lobbies is urging Ottawa and the airlines to wrap up their negotiations quickly.

“Support for the airline sector amounts to relief for the entire supply chain that is fed by it, including small businesses. Action by the federal government is needed now. Time is not our friend,” said Goldy Hyder, president of the Business Council of Canada.

Any government rescue package would require the airlines to refund customers for flights cancelled because of the pandemic, an amount estimated to be in the billions of dollars, the government source said.

Ottawa is also demanding that no bailout money go to executive bonuses; that key regional routes be maintained; and that airlines not cancel orders for aircraft that would affect jobs in Canada. It remains unclear if equipment purchases remain part of the talks, according to the government source.

The government has taken off the table its demand for board seats, but it remains open to some form of equity ownership in return for low-interest loans to the industry, the government and two industry sources said.

Mr. Sabia, the former chief executive officer of Caisse de dépôt et placement du Québec, took the reins for the negotiations from Transport Canada after he was recruited as the deputy minister to Finance Minister Chrystia Freeland in mid-December.

Canadian Chamber of Commerce president Perrin Beatty said Sunday it is critical that Mr. Sabia and the airlines conclude a deal as spring approaches and the general rollout of vaccinations begins.

“If you look at the impact on local communities across the country who have seen air service reduced or cancelled altogether, the economic and social impact is devastating,” Mr. Beatty said. “It is clear that the travel and tourism sector will be one of the last, if not the very last sectors to come back, and that means we need to provide assistance that is tailored to the assistance they need.”

As part of a possible package, Ottawa has also set aside $207-million to help smaller airports adjust to the upheaval in the industry, which could see smaller airlines take over remote routes.

One industry source said the airlines are counting on Intergovernmental Affairs Minister Dominic LeBlanc to work out an agreement with the provinces on nationwide pandemic travel rules. This is not only crucial for the airlines but for the hospitality and tourism industry, which is dependent on airline travel, the source said.

“Given global uncertainty, Canada must prioritize domestic travel and negotiate a transparent and clear policy with provincial governments,” Andrew Gibbons, WestJet’s director of government relations and regulatory affairs, told the Commons transport committee on Feb. 4. “This could be based on COVID levels or a percentage of the population vaccinated.”

The Calgary-based airline was not happy with the federal cabinet’s recent decision to approve the takeover of Transat by Air Canada, which gives Canada’s largest airline an even more dominant position.

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