Canada Launches Up to C$150 Million Airline Loan Facility as WestJet Publicly Refuses the Money
Canada’s federal government launched a new loan programme on Monday offering domestic airlines up to C$150 million each to offset soaring jet fuel costs caused by the Strait of Hormuz closure, but the announcement immediately drew a sharp public rebuke from WestJet Airlines, which said it strongly opposes the programme and will not accept its funds. Finance Minister François-Philippe Champagne announced the launch of the Liquidity for Airline Sector Resilience facility, a new loan programme through the Canada Enterprise Emergency Funding Corporation, offering eligible Canadian airlines experiencing significant financial pressures resulting from elevated jet fuel costs up to $150 million in repayable liquidity support on an as-needed basis. Onmanorama
“Global events continue to create uncertainty in energy markets, increasing costs for industries around the world, including aviation. Canadians should continue to have access to reliable and affordable air travel,” Champagne said in a statement. Whalesbook
WestJet Airlines condemned the Canadian government’s offer of loans to help carriers hit by high jet fuel costs in the wake of the closing of the Strait of Hormuz. The Calgary-based company “strongly opposes” Canada’s plan to lend as much as C$150 million to blunt the effect of high airline fuel prices, it said in an emailed statement on Monday. WestJet did not elaborate publicly on its objections, but the airline’s rejection signals an industry divided on whether state liquidity support is the appropriate response to a supply-driven cost shock. Business Standard
The programme carries conditions designed to limit its use as a subsidy vehicle. Airlines that sign up must commit to buy Canadian, restrict dividends and executive compensation, and maintain existing jobs in the country. Those conditions effectively prevent participating airlines from distributing loan proceeds to shareholders or cutting the workforce while receiving government support — terms similar to those attached to pandemic-era airline support packages in 2020 and 2021. TradingView
The LASR facility is the second layer of aviation fuel relief the Champagne government has introduced since the Iran war began. The government had already temporarily removed the federal fuel excise tax from April 20 to September 7, 2026, reducing costs by 4 cents per litre on aviation fuels, alongside broader relief of 10 cents per litre on gasoline and 4 cents on diesel. The excise tax removal provides immediate per-litre savings on every kilogram of jet fuel burned, while the LASR facility addresses the balance sheet strain from the cumulative cost increase since February. Onmanorama
The federal loan programme marks the second time since COVID-19 that Ottawa has reached out with aid packages for airlines, after Air Canada, Porter Airlines and Air Transat accepted support during the pandemic. The reactivation of the Canada Enterprise Emergency Funding Corporation — the same vehicle used in 2020 — signals that the government regards the Iran war’s impact on aviation as a crisis-level event comparable in its financial severity to the pandemic grounding of international travel. TradingView
Regional and Global Impact
Canada’s programme is one of several government interventions in the aviation sector triggered by the Hormuz closure across the G7. The UK’s Chancellor Rachel Reeves announced this week that a further household and business support package is coming, with aviation among the sectors under most acute pressure. The Embraer chief executive told Reuters on Saturday that some airlines are delaying aircraft purchase option exercises because of the uncertainty created by elevated fuel costs — a sign that the Iran war’s impact on aviation capital expenditure is becoming visible alongside its operating cost effects.
For Air Canada and Porter Airlines — the carriers most likely to access the LASR facility given WestJet’s rejection — the loans provide balance sheet breathing room during what is shaping up to be the most difficult operating environment since the pandemic. Global conflicts and supply disruptions have contributed to significant volatility in energy markets, driving up fuel prices and creating uncertainty across the global aviation sector, including in Canada, the Finance Department said in its announcement. Canadian carriers cannot pass through the full fuel cost increase to passengers without risking a demand destruction that would compound the financial problem, making liquidity support more useful than it first appears. Onmanorama
WestJet’s public opposition introduces a competitive dimension to the government’s intervention. If Air Canada accepts loans and uses them to hold fares lower than the market would otherwise set, WestJet — absorbing the same fuel costs without government support — faces a structurally disadvantaged competitive position. That dynamic is likely behind WestJet’s aggressive public opposition rather than any philosophical objection to state support per se.
Background
The CEEFC was established in 2020 under the Canada Development Investment Corporation specifically to provide emergency liquidity to large Canadian businesses whose viability was threatened by the pandemic. Its reactivation for the aviation sector six years later reflects the government’s view that the Iran war’s fuel price shock meets the same threshold of systemic threat to the sector. The Strait of Hormuz has been effectively closed since the US-Israeli strikes on Iran on February 28, with the dual restrictions of a US naval blockade and Iranian controls keeping global energy supply routes disrupted for more than three months. Canada imports a substantial share of its aviation fuel, and jet fuel prices in Asia — a comparable benchmark — are reported to be 75 percent above pre-war levels, according to OilPrice.com. Canada is simultaneously navigating a technical recession confirmed in first-quarter GDP data, a loonie at its weakest since March, and the July 1 deadline for the CUSMA trade deal review — a combination of domestic and external pressures that has sharpened the government’s impulse to act.
What Happens Next
Airlines wishing to access the LASR facility must apply through the CEEFC, but no application deadline or total programme cap beyond the per-airline C$150 million limit has been publicly stated. The fuel excise tax removal runs through September 7, 2026, at which point the government will need to decide whether to extend it depending on the state of energy markets. WestJet has indicated it will not apply, leaving the programme’s likely beneficiaries as Air Canada, Porter Airlines, and Air Transat — the three carriers that accepted pandemic-era support. The Bank of Canada meets this week and will assess the aviation sector’s distress as one element of a deteriorating domestic economic picture, though no interest rate action linked specifically to the airline sector is expected.
