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 that are struggling under the soaring cost of jet fuel, offering loans of as much as $150-million a company.
The loans are intended to ensure the stability of the airline sector while protecting travellers’ access to affordable routes in the busy summer 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 earlier in the conflict, but well above the prewar US$2 level.
Although Canada is self-sufficient in jet fuel and refines 80 per cent of its needs, prices are set by world markets, where supplies are constrained.
Airlines responded by raising fares and fees, and by eliminating routes made unprofitable by the higher fuel costs. Fuel and labour are an airline’s biggest expenses.
The program is open to all airlines, although it is expected smaller carriers are facing the greatest need, given their smaller financial reserves. Mr. Fragos said he did not know if the financing was established at any carrier’s request.
“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.
Porter Airlines, Air Transat and Flair Airlines welcomed the program.
“Porter will review the new loan program and determine the extent to which we may access funds,” airline spokesman Brad Cicero said.
“We are reviewing the program’s terms to determine the impact on Transat,” spokeswoman Andréan Gagné said.
But WestJet Airlines spokeswoman Jen Booth said the carrier is opposed to the loan program, calling it “corporate charity” that distorts the market and amounts to subsidies for some airlines.
“We’ve seen where this path leads,” Ms. Booth said. “In 2025 alone, taxpayers lost around $400-million in COVID-19-related airline loans that were forgiven by the federal government. With this, they have been turned into direct taxpayer subsidies to some airlines.”
Air Canada spokesman Peter Fitzpatrick said the airline has a strong balance sheet it built in anticipation of such events as fuel-price increases. “We are able to adapt in response and manage this situation,” he said.
Air North will review the loan program but has not decided if it will apply, said Maria Kostaras, a spokeswoman.
The federal financing, called the Liquidity for Airline Sector Resilience, is run by Canada Development Investment Corp., the Crown corporation in charge of financial aid programs established to aid businesses with tariffs and the pandemic.
Participating airlines must commit to sourcing goods from domestic sources, restrict dividends and executive pay, and maintain Canadian operations and employment.
Air Canada, Air Transat, Sunwing Vacations and Porter were among the largest borrowers from the government’s pandemic bailout program, known as the Large Employer Emergency Financing Facility. Transat, which borrowed more than $1-billion, last year renegotiated its $762-million bailout debt in a deal that gave Ottawa the rights to a 20-per-cent ownership stake.
The International Air Transport Association says soaring fuel prices will cut the profitability of the world’s airlines in half this year, to a total of US$23-billion from US$45-billion in 2025. Carriers in the Middle East are expected to fare the worst, given higher regional jet-fuel prices and greater operational disruptions.
“Some of the additional cost is being recuperated by adjusting prices and improving efficiency, but it will not be sufficient to maintain profitability at the previous year’s level,” said Willie Walsh, IATA’s director-general. “Smaller carriers that started the year with weak balance sheets are certainly struggling.”