Air Canada to Use Trudeau’s Wage Subsidy for 36,000 Employees

(Bloomberg) -- A 75% wage subsidy touted by Canadian Prime Minister Justin Trudeau has caught the interest of the country’s biggest airline, a request that could cost the government as much as C$30.5 million (about $22 million) a week.

Air Canada said on Wednesday it will apply for the money to help keep or recall its 36,000 employees based in the country, 16,500 of whom were put on furlough last week. The subsidy, which is open to companies of all sizes, is capped at C$847 a week per worker.

The wage subsidy is one of the largest elements of Canada’s coronavirus emergency plan. Three days after Trudeau unveiled it, Air Canada went ahead with the announcement of a huge round of layoffs. Now it’s rethinking.

The measure is “an extremely important program to help employees and employers during this time of crisis,” Chief Executive Officer Calin Rovinescu said in a statement. It will help many furloughed employees get “a somewhat higher amount” than they would receive from employment insurance while keeping health insurance and other benefits.

The airline said it qualifies because its revenue has dropped by more than the 30%, one of the conditions to apply.

The government estimates the subsidy will cost a total of C$71 billion, more than one-quarter of its emergency fiscal plan to date. Some smaller businesses have said that while the program is potentially helpful, the money will take too long to get to them.

Trudeau has also vowed to craft a separate assistance plan for airlines, one of the most affected industries after many countries restricted travel. But his government has yet to announce one.

“As a result of the crisis, Air Canada has abruptly reduced its seat capacity by 85% to 90% and is incurring significant revenue losses,” the company said. “Any near-term recovery is reliant on the lifting of domestic and international travel restrictions and return of passenger traffic.”

©2020 Bloomberg L.P.

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