The Canadian government has unveiled a new financial relief program offering airlines access to loans of up to $150 million each as carriers grapple with soaring jet fuel prices driven by the ongoing Middle East conflict and disruptions to global oil supplies.
Finance Minister François-Philippe Champagne announced the initiative on Monday, describing it as a temporary measure aimed at preserving affordable air travel, protecting jobs, and maintaining connectivity across Canada during a period of elevated fuel costs.
The loan program comes as airlines face mounting financial pressure from the closure of the Strait of Hormuz, a key global shipping route that handles nearly one-fifth of the world’s oil supply. The disruption has sent jet fuel prices sharply higher, forcing airlines to reduce schedules, cut capacity, and revise profit forecasts.
Under the program, participating airlines must commit to maintaining Canadian jobs, limiting executive compensation and dividend payments, and supporting Canadian procurement initiatives. Government officials said loan terms, including interest rates and amounts, will be determined on a case-by-case basis.
The announcement has drawn mixed reactions from Canada’s airline sector.
Air Canada indicated it has sufficient financial strength to manage the current fuel-price surge without relying on government assistance. The carrier said its balance sheet was built to withstand market disruptions and that it remains capable of adapting to current conditions.
WestJet took a more critical position, arguing that government loans risk distorting the market. The airline said Ottawa should focus on creating a sustainable future for Canadian aviation rather than expanding financial support programs. WestJet also pointed to previous government debt forgiveness provided to Air Transat, raising concerns about taxpayer-funded subsidies within the industry.
Meanwhile, Air Transat and Porter Airlines welcomed the opportunity to review the program, while Flair Airlines said it remains focused on operational efficiency and strategic planning to navigate the current crisis.
The International Air Transport Association recently forecast that profits among major North American airlines could decline by nearly 25 percent this year, equivalent to approximately US$3 billion, due largely to rising fuel expenses.
Canadian airlines have already responded by reducing less profitable routes, increasing ticket prices, and introducing fuel surcharges. Air Canada has cut several routes and lowered its annual earnings outlook by roughly $200 million, while WestJet has announced capacity reductions affecting hundreds of flights.
Travelers are already feeling the impact. According to travel search platform Kayak, round-trip economy fares between Canadian cities increased by 17 percent in late May compared with the same period last year.
Industry analysts note that larger carriers such as Air Canada are better positioned to absorb fuel shocks thanks to fuel hedging strategies, corporate travel demand, loyalty programs, and diversified route networks. Low-cost airlines, however, remain more vulnerable because fuel represents a larger share of their operating expenses and they have fewer revenue buffers.
The new loan initiative marks Ottawa’s second major airline support effort since the COVID-19 pandemic. In 2021, Air Canada secured access to a $5.9 billion relief package, while Porter Airlines and Air Transat also received government-backed support during the aviation industry’s pandemic recovery.
The federal government has also temporarily suspended the fuel excise tax on aviation fuel through September, a move expected to save airlines millions of dollars in operating costs.