Ottawa offers millions in airline loans amid fuel crisis, carriers divided

The federal government on Monday (June 8) unveiled a temporary loan program aimed at helping airlines manage the sharp rise in jet fuel prices, drawing a mixed reaction from carriers.

Under the initiative, airlines will be eligible to borrow up to $150 million each as the effects of the Iran conflict force operators to reduce flight schedules and lower profit expectations.

Finance Minister François-Philippe Champagne said escalating fuel costs have placed significant strain on airline finances, describing the measure as a way to preserve “reliable and affordable” air travel for Canadians.

“By building on existing relief measures with targeted and temporary support for Canada’s airline sector, we are helping maintain connectivity, protect Canadian jobs and reduce pressures on travellers during this period of elevated fuel costs,” Champagne said in a news release.

To qualify for the loans, airlines must commit to “buy Canadian,” limit dividend payments and executive compensation, and maintain current employment levels in Canada.

The government did not provide details on what the “buy Canadian” requirement would entail.

Mixed reactions

Reactions from airlines appear to be indifferent or in opposition to the government’s offer.

“Air Canada has a very strong balance sheet built in anticipation of events such as the recent spike in fuel prices and we are able to adapt in response and manage this situation,” the company told the Canadian Press.

WestJet is opposing the government’s proposal.

“The government faces a choice: continue with costly and market-distorting subsidies or build a sustainable future for Canadian aviation,” a spokeswoman told CP, saying  that last year Ottawa forgave roughly $380 million in COVID-19-related loans to Air Transat.

“With this, they have been turned into direct taxpayer subsidies to some airlines,” WestJet said.

Transat and Porter Airlines both welcomed the loan offer and will review the program.

Flair Airlines said it was handling the fuel crisis through tight planning and “operational efficiency.”

The ongoing Middle East conflict, now entering its fourth month, has led to the closure of the Strait of Hormuz, disrupting nearly 20 per cent of the world’s oil supply and driving jet fuel prices sharply higher.

The International Air Transport Association (IATA) said Sunday that the resulting cost pressures are expected to cut major North American airlines’ profits by US$3 billion this year, a decline of almost 25 per cent.

Air Canada has clarified the situation, however, recently telling customers in an email that it is not running low on fuel and will operate its summer schedule as planned.

“Please be assured that we are fully expecting to operate our current summer schedule. While global fuel markets remain dynamic, Air Canada has a diversified and sophisticated fuel supply in place,” the airline said.

Air Transat has echoed that message.

"Working in collaboration with its partners and suppliers, and supported by a robust supply chain, Air Transat has secured the fuel required to operate its full summer program," the airline wrote in a news release last week. "Operations are running as planned."

The Government of Canada has temporarily removed the federal fuel excise tax from April 20 to September 7, 2026, reducing costs by four cents per litre on aviation fuel, alongside broader relief of 10 cents per litre on gasoline and four cents per litre on diesel.

Don't miss a single travel story: subscribe to PAX today!  Click here to follow PAX on Facebook.