Like all large airlines, Air Canada’s finances were badly damaged by the pandemic, with the carrier hamstrung by border restrictions and evaporated demand. And like many large airlines, Air Canada turned to its federal government to help see it through the crisis.
The deal that the carrier signed this year with the Canadian federal government, led by Minister of Finance Chrystia Freeland, differed in key ways from the bailout deals that the U.S. government reached with its airlines.
The package announced in April gave Air Canada access to interest-bearing loans of C$5.4 billion and C$500 million in equity. In exchange, the Canadian federal government received C$500 million worth of Air Canada common shares and the option to purchase more, and required the carrier to refund all tickets to passengers whose travel plans were changed by the pandemic. Any customer who held nonrefundable tickets for flights that were canceled either by Air Canada or the traveler due to the pandemic could apply for a refund, and the carrier would grant it.
By midsummer, shortly before the deadline to do so, about 40 percent of eligible travelers had requested refunds, a figure lower than Air Canada had anticipated but nevertheless representing millions of dollars in canceled tickets. Additionally, some travelers chose to take their refunds in the form of airline credit which Air Canada took as an optimistic sign. Eventually, about 58 percent of those eligible applied for and received refunds.
The bailout deal negotiated by Freeland and Air Canada went beyond refunds—the final agreement also required the carrier to restore service to communities throughout the country that had lost it due to the pandemic.
Last month, Air Canada announced it would withdraw from the bailout deal, pointing to its ongoing financial recovery. At that time, Air Canada had accessed about C$1.2 billion of the aid dedicated to refunding customers’ nonrefundable tickets.