PBO estimates federal government will profit in Air Canada aid deal

OTTAWA — The federal government could make about $177 million over 10 years from a support deal it reached with Air Canada, the parliamentary budget officer said in a report Thursday.

The PBO estimate is based on Air Canada using only part of the $5.9-billion aid package that the airline agreed to with the government in April.

The package included the government taking a six per cent stake in the airline for $500 million, plus offering about $4 billion in secured and unsecured credit for operating and regular business expenses, and a separate $1.4 billion in unsecured credit earmarked to refund travellers impacted by COVID-19.

In exchange for the support, the airline agreed to refund passengers whose flights were cancelled due to COVID-19, resume service to regional airports, cap executive compensation, maintain staffing levels and to complete previously planned aircraft purchases.

Air Canada also agreed to issue share purchase warrants to the government, with the final number available to the government depending on how much of the credit the airline used. 

The PBO based its forecast on Air Canada using about $1.2 billion of the funds intended to refund travellers, but not using the other available credit which would impose further restrictions on the airline. 

Air Canada has said it would keep the government credit as insurance while going ahead with other refinancing options. On Wednesday, the airline announced it had completed a $7.1-billion refinancing transaction.

The airline has faced severe financial pressure during the pandemic, reporting at $4.6-billion loss in 2020 and more recently a $1.17-billion loss in the second quarter of this year.

Air Canada came under fire in June for bonuses it paid out to executives while taking government assistance, prompting top-level executives to return their bonuses. 

This report by The Canadian Press was first published Aug. 12, 2021.

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The Canadian Press