Canada is offering domestic airlines access to loans of up to $150 million as the industry faces mounting pressure from elevated jet fuel prices linked to the closure of the Strait of Hormuz. The program is intended to provide short-term liquidity support and help maintain service levels if fuel costs remain elevated.
BNN Bloomberg spoke with John Gradek, faculty lecturer in aviation management at McGill University, about the federal government’s rationale for the program, whether the loans will be enough to support carriers and how prolonged fuel-price pressure could affect airline operations.
Key Takeaways
- Ottawa’s loan program offers eligible Canadian airlines up to $150 million in repayable liquidity support to help offset the impact of elevated jet fuel costs.
- Gradek said the government appears to be acting proactively to prevent financial stress from spreading through Canada’s airline sector.
- The support could be meaningful for smaller carriers such as Porter, Air Transat and Flair, but would have limited impact on larger airlines such as Air Canada and WestJet.
- WestJet opposes the loan program, arguing policy reforms would be more beneficial than government financing, though Gradek views the two issues as separate.
- If fuel prices remain elevated for an extended period, airlines may be forced to reduce unprofitable routes and rationalize service levels.
Read the full transcript below:
ROGER: Okay, Canada wants to lend domestic airlines up to $150 million in an effort to help them weather the impacts of high jet fuel costs, all part of the closure of the Strait of Hormuz, which sent oil prices spiking. Joining us now to explain the motivation for the loans and how effective they may be is John Gradek, faculty lecturer on aviation management at McGill University. John, thanks, as always, for joining us.
JOHN: My pleasure, Roger.
ROGER: Okay, what’s the reasoning behind this offer of a loan?
JOHN: I think the government is trying to get, stay one step ahead of financial difficulties that the airline industry looks to be facing over the short term as a result of the Strait of Hormuz continuing to be closed. They’ve seen the impact of these high jet fuel costs on carriers south of the border. When you see Spirit Airlines shut down 140 airplanes, 17,000 employees, declared bankruptcy in the space of a week as a result of these high fuel costs. So, I think the government is saying we’ll stay one step ahead of that eventuality in Canada, and let’s make sure we have some money set aside to help carriers weather this fuel expense.
ROGER: And do loans like this help? Do they work?
JOHN: Well, they tend to work if you look at making sure that the money is spent to, in fact, ensure cash flows and ensure continued operation. They tend to be band-aid solutions that are short term in nature. The question of aviation fuel is one that’s going to be haunting the industry for quite a few, what, quite a few years ahead of us. We’re never going to go back to the days where we had fuel at US$100 a barrel. Those days are long gone. We’re probably going to be somewhere around US$120 a barrel for fuel at best. And, you know, if the Strait of Hormuz stays closed, we have forecasts that have fuel at US$200 a barrel, even higher than that. So, when fuel hits US$200 a barrel from its current level, about US$135, you know, the industry is going to be in deep doo-doo, as they say, and we’re going to be in a question of trying to figure out which carriers are able to survive.
ROGER: That’s an aviation term, clearly. So, is $150 million enough?
JOHN: It should be enough for a carrier like, you know, pick an example, Porter or maybe Air Transat. For carriers like WestJet, carriers like Air Canada, you know, it’s basically, you know, these guys—
ROGER: Sorry, John, you just cut out there. If you could just repeat what you said there. You just cut out.
JOHN: Yeah. No, for the WestJets of this world, for the Air Canadas of this world, $150 million is a drop in the bucket. When you’re talking to carriers like Transat or Porter or Flair, it is big dollars. So, depending on the size of the airline and, you know, the consumption of fuel, it may or may not be interest. So, WestJet basically has already said not interested. They’d rather see that money directed towards reform in the aviation industry, which is a valid comment. But I think the government is addressing a short-term cost issue that has to be addressed and has to be.
ROGER: Yeah, I wanted to ask you about that WestJet comment that said, “We do not take government loans,” and said, “advocate for a competitive environment airlines can succeed based on their own strength.” But are they looking a bit — it’s not a gift horse entirely — but are they looking a gift horse in the mouth at this moment? And are these not two separate issues?
JOHN: Yeah, they’re two very separate issues. I think at WestJet saying let the carriers go bankrupt. They can’t make their way through this process, and one less competitor to worry about. And I think that’s, you know, that’s not the way we should be offering airlines in Canada. We need to have airlines offering competitively. We need the infrastructure in place to support the airlines. So, WestJet’s comment about reforming the Canadian aviation industry is very oblique. It’s not very, very detailed in terms of what they want to do, rather than just saying a blanket statement, we need to fix the airline industry. So, I think there’s going to be a need for some discussion with WestJet. They want us to do.
ROGER: I was going to say, I mean, where’s that comment coming from? That, like, fairly open-ended. I’m guessing there are concerns, but it does seem like they run the risk of offending some people.
JOHN: Well, yeah. I think that, you know, they’ve been on this kick for a year, year and a half. I think the president and CEO of WestJet has been on this bandwagon to reform Canadian industry. I think he wants to look at, you know, less cost. He wants those AIFs that we pay every month to be somehow, some way redistributed to the Canadian taxpayer rather than having users pay for airports. Let Canadian taxpayers pick it up, which is not going to be the case in Canada. You know, he’s, I think he’s against the, you know, the APPRs, the air passenger protection rights, that are sorely needed to be updated in Canada. And I think WestJet saying we don’t want these APPRs, we don’t need protection for our passengers, we’re protecting the passengers as best as we can, and that’s not good enough. So, there’s a lot of issues that WestJet’s been complaining about in terms of government oversight that I think, you know, are just wishful thinking.
ROGER: All right. And then a bigger picture. I mean, are we at the risk of more flights being canceled over the next few months if this drags on?
JOHN: Yes, we are. I think that, you know, we’ve had a conversation about aviation fuel supply that’s been a concern in Europe and in Asia. That seems to have been addressed by carriers kind of looking at different ways of saving fuel and countries importing fuel from different nations other than the Strait of Hormuz. So, I don’t think we’re going to have this fuel supply issue. The question is going to be price. And as much as the airlines have said they protected themselves from hedging fuel prices over the next few months, this is not a long-term solution. You need to basically come up with a better way of managing your costs and managing your fares. I think we’re going to be in situations where carriers will be rationalizing their air services, canceling flights that don’t make any sense, don’t make much money, and only operating those flights because they feel they have a chance of profitability.
ROGER: Okay, we have to wrap it up there. John, thanks, as always, for joining us. Appreciate it.
JOHN: My pleasure. Have a great day, Roger.
ROGER: Cheers. John Gradek, faculty lecturer on aviation management at McGill University.
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This BNN Bloomberg summary and transcript of the June 9, 2026 interview with John Gradek are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
