Foreign airlines receive Canadian wage subsidies

A dozen foreign airlines, including three Chinese state carriers, have benefited from Canada’s wage subsidy program, even though many have received generous rescue packages from their own governments.

In a review of the Canada Emergency Wage Subsidy (CEWS) database, The Globe and Mail found that 12 foreign airlines received money through the program to help Canadian companies and their employees cope with the economic consequences of the COVID pandemic. 19.

Canadian airlines have also received the wage subsidy, but want an industry-specific federal bailout.

“This is incredible,” said Unifor President Jerry Dias, noting that foreign competitors have received Canadian wage subsidies for workers based here. His union represents 15,000 airline workers in every sector of the industry. “You have Canada creating an even greater economic disadvantage for Canadian airlines by subsidizing workers in Canada, when the parent companies also give them billions of dollars.”

The CEWS database shows that Cathay Pacific, United Airlines, Turkish Airlines, Royal Jordanian, Lufthansa, KLM, El Al, Ethiopian Airlines and IndiGo Airlines received the salary subsidy. Three Chinese state-owned airlines – China Southern, Beijing Capital and Hainan – have obtained it.

Many of these airlines have received generous financial aid from their own governments, such as Hong Kong-based Cathay Pacific and United Airlines, which have raised $ 5 billion in resources.

Cathay closed his Vancouver office in March just before the pandemic blockades began, so it’s unclear how he qualified for the pay subsidy. None of the foreign airlines that received CEWS could be contacted immediately for comments.

“Our government is taking out a welcome carpet for international airlines, while punishing Canadian airlines and their workers,” WestJet President and CEO Ed Sims said in a statement to The Globe. “We call on the government to move quickly to provide financial assistance to our industry, which has already lost 20% of our valuable international guests to carriers outside of Canada.”

Finance Minister Chrystia Freeland’s office said the wage subsidy is designed to protect jobs in Canada, saying CEWS has helped four million Canadians stay in payroll.

“We recognize that some state-owned enterprises have accessed the program to support jobs in Canada. We continue to actively evaluate wage adjustments, “said Press Secretary Kat Cuplinskas in an e-mail. “If these funds have been misused, the penalties may include reimbursement of the salary subsidy, an additional penalty of 25% and, possibly, imprisonment in case of fraud.”

The minister’s office did not address the lack of action on a rescue plan for the Canadian aviation industry.

However, a source said that the new Deputy Minister Michael Sabia, former CEO of the Caisse de dépôt et placement du Québec and BCE Inc., has been appointed to reach an agreement to protect the interests of Canadian travelers and the financial viability of the airline industry. The globe does not identify the source because they are not allowed to discuss cabinet deliberations.

Airlines have lost billions of dollars in revenue from the pandemic. The total demand for air fares in November decreased by 70% compared to the same month in 2019, said the International Air Transport Association.

In addition to wage subsidies, Canada has offered commercial loans to airlines and other large employers. The aviation industry received rental deferrals at the airport and collected some fees.

Canadian airlines and the tourism industry want sector-specific aid, especially as their global rivals receive state aid at home in the form of cash subsidies, loans or equity investments.

According to IATA, the United States offered its carriers a $ 35.7 billion exemption, while Germany offered $ 13.6 billion, of which Lufthansa received $ 10 billion. France’s air package totaled $ 7.6 billion, and the United Kingdom offered $ 3.3 billion.

The names of foreign airlines are on an online database searchable by the Canada Revenue Agency. Only the company name is displayed, not the amount of the grant or when it was received.

The program was designed as short-term salary support for companies that experienced a sharp drop in revenue due to COVID-19. The size of the benefit is proportional to the degree of loss of income. The parliamentary budget office estimates that the grant cost almost $ 100 billion.

John Gradek, who teaches aviation management at McGill University, said each airline employs a small number of Canadians or expatriate workers at call centers, airport services or marketing offices, as do Canadian airlines in London and beyond. global hubs.

“They are legitimate Canadian taxpayers. It is not as if they are doing this illegally, ”Mr Gradek said of the carriers and their employees. “The optics are a little weird, but they don’t do anything outside the regime that the government has implemented.”

The government has five key requests for negotiations on a rescue package for Canadian airlines, including a call for carriers to open their books, refrain from canceling orders for Canadian-made aircraft, protect vital flight routes and provides reimbursements for canceled flights worth billions of dollars.

Among the applications of the aeronautical industry: financial aid, preferably in the form of subsidies or interest-free loans; a national COVID-19 test regime to allow for shorter travel quarantines; a framework for the reopening of domestic travel, including a plan to identify safe corridors and create internal bubbles such as that in Atlantic Canada; airport and Nav Canada tax breaks; exemption from carbon tax on fuel; incentives to buy low-fuel aircraft; exemption from the request for reimbursement of all tariffs.

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