Passengers arrive at Pearson International Airport in Toronto in February. The federal government is offering loans aimed at smaller airlines in the face of high jet fuel costs.Jon Blacker/The Canadian Press
The federal government is providing financial relief to airlines struggling under the soaring cost of jet fuel, offering loans of as much as $150-million per company.
The loans are intended to ensure the stability of the airline sector while protecting travellers’ access to affordable routes in the busy travel season, said John Fragos, a spokesman for Finance Minister François-Philippe Champagne.
Jet fuel prices doubled after the United States attacked Iran on Feb. 28 and Iran began restricting vessel traffic through the Strait of Hormuz in retaliation. The waterway carries 20 per cent of the world’s oil and natural gas and 75 per cent of Europe’s imported jet fuel. The spot price for U.S. Gulf Coast jet fuel is US$3.57 a gallon, down from US$4.34 price earlier in the conflict but well above the pre-war US$2 level.
Airlines responded by raising fares and fees and eliminating routes made unprofitable by the higher fuel costs. Fuel and labour are an airline’s biggest expenses.
The loan program is aimed at smaller airlines, including Porter Airlines, Air Transat and Flair, although Mr. Fragos said he did not know if it was established at any carrier’s request.
The airlines did not immediately respond to e-mailed questions.
“We’re hosting the World Cup and so we want to make sure that there is access to airlines of all sizes in Canada to keep air travel affordable for consumers,” Mr. Fragos said by phone.
Canada is hosting several games for the soccer tournament, which starts Friday.
The financing is run by Canada Development Investment Corp., the Crown corporation in charge of the financial aid programs established to aid businesses with tariffs and the COVID-19 pandemic.
Participating airlines must commit to sourcing goods from domestic sources, restrict dividends and executive pay, and maintain Canadian operations and employment.