As passengers pushed for refunds, Air Canada got more than $400 million for wage subsidy

This story is part of The Big Spend, a CBC News investigation examining the unprecedented $240 billion the federal government handed out during the first eight months of the pandemic.

Air Canada hasreceivedthe largest amount ofgovernment pandemic aidof all publicly traded companies in Canada that havedisclosed theirfinances to shareholders to date, a CBC News investigation hasfound.

The country's largest airline reported that it collected $492 million in public funds through theCanadaEmergency Wage Subsidy(CEWS)to pay its employees over aperiod endingSept. 30, according to regulatoryfilings.

According to CBC's findings from information posted todate, that's roughly four times more than the second-highestsum paid to a publicly traded company throughthe wage subsidy,which went toImperial Oil. The Calgary-based energy giantdisclosed it received $120 million from CEWS. Linamar, a large automobile parts manufacturer, and Air Transat also received more than $100 million each to help cover salaries.

Air Canada said that at the beginning of the COVID-19 pandemic, it employed about40,000 people making it one of the "largerprivate sector employers in Canada" in an industry hit "disproportionately hard" by the pandemic.

"Put simply, we are by far the biggest company in perhaps the worst industry," Air Canada spokesperson Peter Fitzpatrick wrote in a statement issued to CBC News.

Despite Air Canada receiving hundreds of millions of dollars to pay its workers, the air carrier is in the midst of private negotiations with the federalgovernment on apossibleindustry-specific support package. Some experts argue the carrier is using travellers' demands for refunds for cancelledflights as leverage to pressure the government during the negotiations.

John Gradek, a former Air Canada executive and lecturer at McGill University's global aviation leadership program, claims the airline industry is "bullying" the government into bailing out the sector, arguing that other countrieshave already done so. He saidAir Canada is playing a "shell game" of its own.

"I think it's a little bit of gamesmanship that's being played by Air Canada," Gradeksaid. "They're insisting that those refunds will only be processed if the Canadian government, through the Canadian taxpayer, is providing the funds for those refunds. Not a good thing."

WATCH |John Gradek on Air Canada pandemic aid and fare refunds:

'The Canadian aviation industry is really bullying the government,' said former Air Canada executive.

4 years ago

Duration 0:23

John Gradek, a lecturer at McGill University, says the airline industry is arguing it's time for the government to bail out struggling airlines since other countries have done so.

400 private companies reviewedby CBC

CBC News analyzed data from more than 2,000 publicly traded companies listed on the TSXand TSX venture exchangesand identified 400 businesses that have already filed public disclosures indicating theyreceived taxpayer support.

While the figures reviewed byCBC News indicateAir Canada hasreceived the most taxpayer-funded pandemic support of any company to date, therecould still be other companies that have received more andhave not yet publicly disclosed the sums.

WestJet, Sunwing, Porter Airlines and Flair Airlines all received the wage subsidy to help cover their payrolls; none of them trade on the TSX and none of themhave disclosed to CBC Newsthe amount of money theyreceived. Chorus Aviation, which owns regional airlines Jazz and Voyageur, received almost $97 million throughthe wage subsidy, according to TSX filings.

In total, the federal government spent $1.4 billion helping Canadian airlines pay up to 75 per cent of employeewages during the pandemic, according to the federal government's falleconomic update, released last week.

'The biggest company in perhaps the worst industry'

No one from Air Canada would sit for an interview withCBC News. In a mediastatement, the airline said it received a substantial amount for the wage subsidy because it employs so many people, and "as much as 95 per cent of our revenue disappearing virtually overnight, which is why the government is now looking at specific sectoral support for our industry, justas governments around the world have already done for their airlines."

"Given this, it is only to be expected that we are a relatively large user of CEWS our next biggest domestic competitor was less than one-thirdour size in terms of employees at the outset of COVID," Fitzpatrick said.

As the pandemic crushesairlineindustry revenue,passengers many of them struggling financiallyhave been angrily demandingthat the federal governmentforce airlines to refund them forcancelled flights.

More than 100,000 Canadians have joined petitions calling for government action on refunds, and several class-action lawsuits havebeen filed against airlines.

Air Canada holding$2.3Bin revenue from ticket sales

Air Canada's president and CEO, Calin Rovinescu, told BloombergNews earlier this month that despite the financial hit, his airline has already paid back $1.2 billion in refundable airfares.

Rovinescutold Bloombergon Nov. 18 thathe has "no quarrel" at all with refunding customers for non-refundable flights, "assuming that the terms of the support package are adequate and the terms are appropriate and reasonable."

Air Canada has reported that, as of the end of September, it had $2.3 billion in revenue on handfrom ticket sales about 65 per centof which came fromnon-refundable fares.

Gradekargues that Air Canada has the money to pay the refundsbut is using it as a bargaining chip in bailoutnegotiations with the federalgovernment.

"Air Canada does have the cash," he said, pointingto the airline's $8 billion in unrestricted liquidity as of September. "Air Canada does not need government funding in order for it to process those refunds."

No more sectoral support without refunds, says Garneau

Transport MinisterMarc Garneausaid he has made it clear to airlinesthat they must pay out the refunds before they can getany more government aid.

"We said very clearly no until they commit in writing to refund passengers, they will not get a cent from the Canadian government," hesaid.

When asked byCBC News whether Ottawawould allow airlines to use taxpayer dollars to refund passengers, Garneausaid he would not go into details since the negotiations with the airlines are confidential.

But he did suggest that if airlines meet the government's requirements for financial support and commitin writing torefundingpassengers, carriers could qualify for help. The government has imposed conditions on bailing out air carriers that require them to issue refunds, maintain air connections throughout Canadaand honour anyorders placed withCanadian aerospace companies.

"It takes a while to do that refunding because there are quite a few passengers, but once the refund agreement is signed a very specific undertaking by both sides then they'll be in a position to receive our assistance as they begin the refunding process," Garneau said.

WATCH |Transport Minister Marc Garneau on sectoral aid for airlines:

'They will not get a cent' until airlines commit to customer refunds, says Transport Minister Marc Garneau

4 years ago

Duration 0:32

Transport Minister Marc Garneau said the government is currently in confidential talks with major airlines about an industry-specific aid package contingent on a number of strict conditions.

'I'm extremely upset about it'

Air Canada customer Calvin Hill said he feels like a "hostage."

He and his wife said they are out $4,000 for Air Canada flights they never took. They said they'resleeping in their daughter's basement in Medicine Hat, Alta., and are helping her out with her kids. The couple said the moneycould have covered roughly four months' rent.

"I'm extremely upset about it," Hill said. "Then to find out that the airlines want to turn around and have us Canadian taxpayers bail them out while they refuse to turn around and refund the monies back to us it's very upsetting."

Hill, whoretired last year,planned to takethe trip of a lifetime to Asia with his wife. Then the pandemic hit and the government told all Canadians to come home in March.

Air Canada wouldn't allow the couple to board their original flights out of Bangkok to get home due to travel restrictions on one of their layovers, Hill said. As a result, heand his wife had to pay for flights home with another carrier.

Hill claims anAir Canada agent promised to refund their tickets, but he's still fighting for the moneymore than eight months later.

"They're holding us as people with outstanding vouchers or refunds hostage unless we tell them, 'Well, you give me a dollar in my left hand and I'll give you a dollar back in my right hand to pay for it,'" he said."Which I think is ridiculous."

Major gap in Canada's Air Passenger Protection Regulations

Air Canada said it's offering non-refundable ticket holderstravel credits with no expiry date that can be transferred to others or to "convert their booking to Aeroplan points and with an additional 65 per centbonus."The airlinesaid this option is in line with direction given by the Canadian Transportation Agency.

Scott Streiner, chair and CEO of the Canadian Transportation Agency, testified in front of MPs last week thatthere is a gap in Canada's Air Passenger Protection Regulations that no one saw coming. Canadian airlines are not obligated to refund passengers if cancellations are out of a carrier's control, he said.

"[The regulations] refund obligation applies exclusively to flight cancellations within airlines controls,"Streiner told the transport committee on Dec 1."We now know the gap highlighted by the pandemic is significant."

Streiner said if and when the CTA gets authority to fix that gap, "we'll fix it."

In contrast, Air Canada isoffering customers who flew out of Europe a refund for non-refundable tickets after "extensive discussions" with European Union members.

Air Canada in talks with government

Air Canada's third-quarter results report to investors showsthe dramatic impact the pandemichas had on the company. The airline says itsawan 88 per cent drop in passenger traffic due to the pandemic and travel restrictions.

The airline reported total revenues of $757 million in the third quarter; that representsan 86 per cent drop of $4.7 billion from its revenues in the same time period in 2019.

Bleedingcash, Air Canada took what it called "the painful step" of cutting half of its workforce in June 20,000 jobs and indefinitely suspended 30 domestic regional routes. The carrier also retired some planes early and postponedor cancelledthe delivery of some new aircraft, according to the company's financial records.

Wesley Lesoskyis the president of the Air Canada component of CUPE, which represents 6,000 laid-off flight attendants. He said Air Canada should have kept those peopleemployed through the wage subsidy program, asother airlines did.

Lesoskyis also the president of the union's airline division, whichrepresents15,000 flight attendants at otherairlines, including Air Transat, Sunwing and WestJet.

"If the government's going to give an employer that amount of assistance, which is quite high, it should have conditions tied to it where the workers are actually protected," he said.

Air Canada, meanwhile,told CBCNews thatCanada is "somewhat of an outlier among developed nations in not having a targeted, sectoral support program for the aviation industry."

The carrier points to the International Air Transport Association's chief economist, who stated recentlythat more than$160 billion US ingovernment aid has gone to airlines globally.

The U.S. and some European countries have given billions in financial aid to airlines. In some cases, there were strings attached to that aid, such as governments takingequity stakes in the airlines and requiring them to issue refunds.