Sunwing takes $375M LEEFF loan to 'ensure liquidity' during flight suspension: Sunwing president
The head of battered air carrier Sunwing Airlines Inc. said the latest travel measures implemented by Ottawa to cancel outgoing flights to sun destinations through the end of April pushed the company to avail itself of a federal loan program.
In a television interview Tuesday, Sunwing President Mark Williams said the latest travel curbs snowballed on top of earlier shutdowns from last year making now the right time to take out the $375 million liquidity facility under the federal government's Large Employer Emergency Financing Facility (LEEFF) program.
“We’ve been shut down pretty much since March of last year," he said "We did 230 days with no flights at all. We ramped up in November with a small program, but that’s been curtailed again now with the new request from the government that we stop flying to the Caribbean and Mexico, which is essentially the only places that we fly."
“We thought it was good now to ensure that we had liquidity going forward for a more lengthy temporary suspension of operations and then gear up for a ramp up a few months from now.”
Sunwing was the first air carrier to tap into the federal loan program, and only the third company overall to have its request approved. The LEEFF program is available to companies that demonstrate $300 million in annual revenue and are seeking loans in excess of $60 million.
The terms of the loan agreement are onerous compared to more traditional forms of financing, carrying a five-per-cent interest rate for the first year, before rising to eight per cent after 12 months. That rate increases by two-per-cent every following year.
While those terms have appeared to impede widespread adoption of the LEEFF program, Williams said the prolonged shutdowns Sunwing faced as sun destination-focused carrier dictated that more attractive forms of finance would be harder to secure.
“With the long suspension in operations, it’s very difficult for a company like Sunwing, a travel leisure group, to go out and tap a normal debt market in order to raise funds for liquidity,” he said. “So, the government is there to step in and assist when the normal markets aren’t prepared to step in.”
While Sunwing’s outsized exposure to tropical destinations prompted to company to tap into the federal loan program, Williams said the industry overall still needs support and that his firm would welcome a targeted aid package for the air carriers.
“The industry in general needs support. The government’s been discussing an industry-specific package, clearly they’ve been looking for that and I think that all the airlines are going to need help, one way or the other,” he said. “We were well down the road with LEEFF, so we’ve got into this facility. If there was an industry-specific package, we’d obviously welcome that.”