Parses captions for PM Trudeau's daily speeches and presents them in a more human readable format
COVID-19. His focus today will be on that one-time boost to the Canada child benefit that was previously announced. It is part of the government’s bid, of course, to help canadianfamilies during all of this. But the Prime Minister is also expected to address a big picture economic issue today, the news of air Canada has announced it’s planning to layoff at least half of its workforce. It’s yet another high-profile canadian company that is struggling to stay afloat, so we’ll bring you that in about 15minutes’ time when the Prime Minister comes out of his front door. In the meantime, let me bring infrom our parliamentary bureau the cbc’s david Cochrane is joining me today in ottawa on this Saturday. Thanks for doing that, david. So let’s start with the air Canada announcement. We’re going to talk shortly withthe professor about it too, but these are substantial layoffs, somewhere in the neighbourhood of 20, 000 people, and it comes in spite of significant packagesoffered to large companies like air Canada.
David:
Yeah, I think it’s going to be interesting what the prime Minister has to say about that. I don’t think there’s going to be a tremendous amount of news in his actual speech or announcement today. It sounds more like a summary of things that have been previouslyannounced, but his response to what is happening with one of Canada’s largest and most important companies is going to be interesting. and Rosie, it really just illustrates the challenge that not only air Canada faces but Canada as a whole faces in coming out of the economic devastation caused by the pandemic. The airline sector acutely vulnerable, and air travel being down I believe 95% or just around 95%, give or take, since the beginning of this. and air Canada suffering a billion dollar loss in the firstquarter, and even with things like the wage subsidy and loans being made available to it of quite a significant magnitude by the federal government, it stillcan’t afford to do things like pay its pension obligations, pay its benefits and finance its fleet and maintain the staffing levels that it has. So whenever any major company is laying off more than – talking about laying off, because none of this has been official yet, more than half of its workforce, it’s a dark day for the country, but it also just shows the challenge and the approach the government has taken here in that by and large Canadians are getting grants, Canadian companies are getting loans. and it seems to be a better business decision for air Canada’s executives at this point to lay people off rather than wrack up debt. and looking forward, as the economy tries to come back into some sort of a recovery, all of these companies that are taking on significant debt that we will count on to rehire and grow and invest and expand, debt servicing costs and debt repayment may get in the way of rapid re-hiring, rapid investment and rapid expansion simply because the obligations they are taking on are not goingto be insignificant, and that’s going to eat into their bottom line quite considerably.
Rosemary:
I think the airline said they are burning through $22 million a day.
David:
Yes.
Rosemary:
and they expect these problems with limited air travel to exist for about three years. So you can imagine, I would guess, that air Canada is doing this to make sure it doesn’t go under, which would be a far more devastating consequence for this country than, you know, the layoff of 20, 000 people. I realize that that’s a terrible thing too, but for the whole airline company to go under, youknow, would not obviously work for this country given how little competition there is out there anyway. So I mean, I would like to hear the Prime Minister talk about the fact that this will happen, that there will be companies that as the governor of the bank of Canada suggested this week that will go bankrupt. Air Canada is not – is trying to not be one of them, but there are companies that are going to fail because there are industrial that are not going to come back very quickly.
David:
Yeah, you do the math on those air Canada numbers, andit’s just under a million dollars an hour that the company is losing right now. With no real signs of it gettingbetter. The wage subsidy the Prime Minister announced yesterday would be expanded until the end of August, this is not going to be over by the end of August. Certainly not for air travel. You have to look at how business is adapting to the inability to meet in person, a lot more things are happening over zoom. Business things are happening remotely as opposed to getting together. You have to wonder how quickly business travel will come back, how quickly government travel will come back. Federal civil servants flying around the country and business people flying around the country is a huge part of the daily traffic for airlines. Then even in this sort of, like, half phase before there’s a vaccine of air travel of allowing for physical distancing inside of a plane, removing people from the middle seats. That’s fully one third of revenue right there, even on what could be a full plane. So the challenges air Canada are facing are absolutely enormous. Speaking of somebody in government what is looking at this – who is looking at this whole sect oral aid, going back adecade, it took the airlines three to five years to kind of come out of that, and that was really about the movement of money as opposed to the movement of people, which is what this crisis is about, the medical coma that the economy has been placed into. So the challenges there of getting back to full flights is going to be significant and enormous for airlines, because even if the restrictions lift, will the demand come back in will people be willing or eager to do it, and will their businesses or their households even have the money to spend on business travel and recreational travel when the country gets and the world gets back to a point where that is even possible from a medical perspective. So this air Canada thing, it just shows that the multi- – the hundreds of billions of dollars in aid that have been put on the table, the loans in excess of $60 million for big companies like air Canada that have been made available, it’s still just not enough. The challenges are still too great.
Rosemary:
Let’s just talk, before I talk more with an expert about this decision, about the extension of the wage subsidy program, which happened yesterday, now moving to the end of August. I’ll point out, though, that it is still the uptake for that program is still not obviously where the government wants it to be. They have about 2 million workers on it, 120, 000 businesses that have been approved. But it’s worth $73 billion. Bill morneau yesterday couldn’t say if that figure will get bigger because of this extension, but it’s only paid out just over 3 billion. Just over 3 billion. You know what I’m saying. So the uptake there is small, and I think there were concerns on the part of the government that the CERB had been so – youknow, there’s been such a high number of people who have used it and it’s gone even above what they thought it would be, and now they have to find a way to make that transition, try and get people off of that benefit, back into jobs if they can, and try to get companies using the subsidy.
David:
Yeah, the federal wage subsidy being a national program they rolled out with broad national conditions. One of the challenges in getting that going in a big way is the local conditions on the ground for a company. If you’re still under a pretty aggressive stay-at-home order, shelter-in-place order, do you even bother to rehire people if you know you can’t reopen at all? so there were disincentives for people to do the uptake just because of local circumstances and a total lack of economic activity. Even though you may not have been required to reopen to get the wage subsidy or get the top-up, there was a lot of unknown and uncertainty about itwhich has been a barrier for people to take advantage of thatprogram. a lot of businesses were dealingwith more pressing concerns, howdo I pay this April 1 rent and the May 1 rent, never mind rebuilding the workforce and signing up for a program that took four or five weeks to really get to launch and is onlynow putting money into the economy. But they do have this other challenge. a lot of people on CERB getting the $2, 000 a month, so that onlylasts for 16 weeks, and they want to do this what they call aglide and launch thing, where they sort of slowly wind down the emergency response benefit and then ramp up the wage subsidy to get the economic reopening going. The challenge there, rosie, is that the country, it’s differentdepending on which part of the country you live in, but it’s still a very tentative step towards reopening in a lot of places. Alberta, much further along thanontario or certainly Quebec are on this particular path, but even there, calgary and brooks are under a different set of economic circumstances than, say, edmonton and red deer wouldbe. So this is the big challenge they need to figure out, and also, rosie, how does CERB work with employment insurance? ei already works on a regional basis, where depending on the unemployment levels, different hours of work are required to qualify it. Does the emergency response benefit need to be tweaked to bemore like employment insurance so that it has different criteria depending on different parts of the country and what the specifics of your local epidemic are and the local economic circumstances are. Because the preference is to have people on the wage subsidy rather than the CERB because that at least invites the hope of an economic reopening and return to normal.
Rosemary:
Yeah, and it also deals with the problem of a business owner I encountered yesterday, only has one employee and she’s making more money on the CERB than if she came back to work. They have to find a way to blend the CERB probably with the EU program to make that work somehow. Okay, David, I’m going to just leave you for a moment if I can. The Prime Minister will come out of his front door in about six minutes’ time. In the meantime, though, let’s bring in Fred liquor stores demarch for some analysis of the news that air Canada will lay off 50 to 60% of its workforce. He is at ryerson and in Toronto, Frederic, good to see you. Thanks for joining us on this Saturday. Appreciate it.
You’re welcome. Good morning.
Rosemary:
Good morning. How surprised were you with this announcement by air Canada? because I think there was some hope, at least amongst employee sand the union, that the various aid packages from the government would be enough to maybe keep more of the workforce going.
Yes, but unfortunately this is the worldwide situation that is hurting everyone, and you know, the world over, the travel and tourism sector, and to me it’s not a surprise that air Canada, such as the European airlines or American airlines, are suffering. and I think we’re going to see more of those kind of moves in the next few weeks.
Rosemary:
The fact that they are at, you know, I guess it shouldn’t be shocking, but it kind of is when you hear the number of 5% capacity, that’s what they are able to fly at, do you think that they are right to assess or determine that this will be something that lasts within the industry for as much as three years?
That’s what the CEO of the international air transport association is saying. He’s talking about at least three years to recover. So in fact, what that means is that all of the airlines will be reducing volume. So some of them will be disappearing, unfortunately. Some of them will stay afloat, but they will certainly stay afloat in a much smaller scale. So people are not ready to fly. There are still some barriers, internationally, we still cannot fly internationally, and it will take months, and three years probably to come back to normal.
Rosemary:
What do you think that means for the consumer? obviously no one’s inclined to fly right now. I think that’s part of the problem here for airline traffic. Obviously people aren’t wanting to go anywhere, but what will it mean for the consumer over the long run, do you think?
So it’s a matter of trust, you know. You know, people at the moment obviously have been told, you know, for many months, you know, not to travel, not to see anyone, ET cetera, ET cetera, so we don’t travel because we are fearful of travelling. On the other hand, you know, some of the airline operators, like air Canada, just announced, as you know, the clean chair plus type of situation where they are going to beef up all the hygiene procedure, and so we are trying to make the customers feel more comfortable about travelling and about taking the plane, but nonetheless, the trust is not going to be there before, you know, several months. and on the other hand, I think the consumers will have to realize that they will have to do something else than, you know, flying. So the business travellers are adapting. They are meeting through media, like this one, for example, and the leisure travellers will realize they won’t go to the Caribbean or to Mexico for their usual weekly trip. So I think they will have to rediscover their own country. This is in fact good news for Canadian tourism. There will be more domestic tourism.
Rosemary:
That’s interesting, because there are, as you know, some provinces that aren’t even letting domestic tourism happen. New Brunswick comes to mind as apace that’s completely shut down its internal borders. I guess eventually that could happen. Do you think the fact that there are such strong restrictions as well between Canada and the United States has perhaps surprised air canadaand other airline companies?
It probably – it has the biggest impact for sure, you know. It’s the biggest market for us, you know, the United States, whether it’s driving or flying. So the fact that this border is still remaining closed, you know, is the main impediment to recovery for the travel and tourism sector in Canada. So how long will that last? we don’t know.
Rosemary:
I know that air Canada lost more than a billion dollars in its first quarter, but it was actually doing pretty well as a company before that. and now it says it’s burning through $22 million a day. is there possibility that air Canada can’t survive this, or are they doing this in order to survive it?
So they are for sure doing this in order to survive it. But I think it’s important to realize that it’s an airline that is essential to any country, and we need air Canada, and any country will need to have at least one, two or three airlines to fly. Recovery will be dependent upon the ability to fly people and to fly merchandise. So we don’t want to see air Canada die. There is no way, I don’t think, you know, the government will let it happen.
Rosemary:
Well, so that leads me perhaps to My last question, and that is obviously they were taking a – they are taking advantage of, plan to, the wage subsidy program, air Canada. There was that large company bridge financing that they could have tapped into. Should the government or could the government consider some sort of more directed bailout, as we have seen, for instance, in the United States?
Frankly, I think that’s what they will have to do at one point. You know, the airlines, there is large debt in the airline business as your colleague stated earlier, the cost of renting some of the planes and operating, ET cetera. It’s a very expensive business with low margins, and so as they keep borrowing money from the government or from other sources, they will have to repay the debt at one point. is this going to be a solution in the long term? probably not. We’re going to have to find some other solutions to help them survive.
Rosemary:
Hmm. Okay, last question, do you think that we will go back to air travel as we knew it? and I don’t mean what it will look like and how I will be sitting, but I just mean the vast number of flights and passengers and travellers. Do you think that will actually ever happen?
It might happen in a long time, but in the foreseeable future, the next three to five years we’re going to see smallerairlines, fewer airlines. We’re going to see fewer destinations also that will be available for flyers and visitors. So we may go back to the system as well as finding so [indiscernible] that we see today going from point to point. So it is changing, you know, the whole system of the airline sector, and how long will it last? that’s a good question. We don’t know.
Rosemary:
Frederic dimanche, thank you so much for taking time on this Saturday. The Prime Minister is out, so I will let you go. Thank you so much. Here is the Prime Minister of Canada.