Airline Industry Bailout Talks Ongoing as Committee Explores Options

March 24, 2021 Updated: March 26, 2021

While the federal government continues talks with airlines over a bailout package that could cost as much as $9 billion, a parliamentary committee on March 23 heard from other aviation sector players about ways to assist the recovery of the industry left reeling from pandemic restrictions on domestic and international travel.

Ottawa’s fighter jet contract is worth up to $19 billion for the winning firm, and Boeing is one of three aircraft manufacturers that have bid on the contract. Boeing boasted last October that its project “can guarantee” $61 billion for the Canadian economy and generate nearly 250,000 jobs over its 40-year lifespan.

But until Ottawa makes a decision, that windfall for the aerospace industry and the chosen bidder remains in limbo.

On March 23, Boeing International president Michael Arthur told the standing committee on industry, science, and technology that a winning bid to replace Canada’s aging fighter jets with Boeing’s next-generation Block III Super Hornets would benefit the domestic aerospace industry, regardless of dollar-for-dollar investment obligations tied to military procurement contracts.

“We have 500 suppliers already in Canada,” he said.

At the beginning of March, WestJet cancelled an order of 15 Boeing 737 Max planes, blaming the industry downturn.

Tracy Medve, president of British Columbia-based KF Aerospace, a maintenance, repair, and operations (MRO) provider, told the committee that an immediate fix would be to lift pandemic travel restrictions on technical representatives who need to enter the country to work on aircraft maintenance.

“Pilots can come and go in and out of the country with relative ease, but now, suddenly, the maintenance technicians … are now being impeded,” said Medve.

“When we’re talking about this industry, we’re not just talking about the airlines, but about all the back-end providers. … Sometimes the policy-making really stops at the carriers’ door. We think carriers like Air Canada should come to Canadian MROs first,” she said.

Medve noted that her company’s recent expansion happened independent of government loans or subsidies, and said she did not want her appearance at committee misconstrued with “asking for a handout.”

Aaron Wudrick, federal director of the Canadian Taxpayers Federation, said the CTF takes a zero-government-subsidies position for any industry. However, he conceded that “if governments decide they are going to support businesses … the bare minimum expectation for taxpayers is that they should be able to see where the money goes, when it gets paid back, and whether the contract gets fulfilled.”

Wudrick’s comments were related to Liberal committee member Nathaniel Erskine-Smith’s suggestions that instead of a government handout, Canada could take on an equity stake, similar to what the German government did with Lufthansa in May 2020, taking a 20 percent stake in exchange for 9 billion euro (nearly US$10 billion at the time).

“Wouldn’t you think … that the public interest is better protected by government having a serious stake and a seat at the table?” Erskine-Smith asked.

“It’s definitely better than a no-strings-attached approach, I’d definitely agree with that,” Wudrick said.

Previous government loans to Canadian transportation firms have cost taxpayers hundreds of millions of dollars with mixed results.

In February 2020, European multinational Airbus SE and the Quebec government took over Bombardier’s share of their joint venture to build Airbus’s A220 jet, formerly called the C Series, as the Montreal-based plane and train company moved to reorganize its business to pay off a massive debt. This occurred after Quebec invested $1.3 billion in the C Series in 2016, after which Ottawa in February 2017 provided a $372.5 million loan to Bombardier for its C Series and Global 7000 jet programs.

In March 2017, the company took heat for approving US$32.6 million to a few senior executives after laying off some 14,500 employees worldwide over the previous two years.

In August 1986, the federal government sold failing Crown corporation Canadair to Bombardier for a purported $200 million, eight months after selling de Havilland Aircraft of Canada Ltd. to Boeing Co. for $155 million.