Sunwing takes $375M LEEFF loan to 'ensure liquidity' during flight suspension: Sunwing president
Sunwing is tapping into a federal loan program aimed at helping large employers make it to the other side of the pandemic, the first such major Canadian airline to do so.
Under the terms of the deal announced Monday, Sunwing Vacations Inc. and Sunwing Airlines Inc. will gain access to $375 million in additional liquidity through the Large Employer Emergency Financing Facility (LEEFF), a move the airline said will help it preserve jobs as the airline industry continues to suffer.
As part of the agreement, Sunwing will set aside cash already paid by customers for travel that was cancelled due to the pandemic. The account will be maintained as the federal government and the airline industry conduct negotiations on the treatment of those prepaid amounts.
The federal government has repeatedly said those prepaid deposits are a key tenet to approving targeted aid for the airline sector, which was dealt another blow when Prime Minister Justin Trudeau announced a ban on outgoing flights to sunshine destinations until the end of April to combat the spread of new COVID variants.
According to government documents, Sunwing has drawn $50 million of the $375 million facility, and is the first Canadian air carrier to tap the program. The LEEFF program provides loans in excess of $60 million, and is available to companies that can generally demonstrate at least $300 million in annual revenue.
While the federal government put the LEEFF program in place in 2020 to help large employers who are unable to access more traditional sources of financing, uptake has thus far been tepid. Sunwing is just the third company to have its LEEFF application approved, joining Gateway Casinos & Entertainment Ltd. and Conuma Resources Ltd. Other applications for the LEEFF program are currently under consideration.
Among the concerns raised about the program is the relatively steep interest rate charged to companies, starting at a five per cent annual rate, rising to eight per cent after one year. Companies that also tap the LEEFF program must publish climate-related discloses and note how their future operations will support various national environmental goals.