Sunwing Owes Ottawa Over $316 Million in Pandemic Loans: Federal Records

A Sunwing aircraft is parked at Montreal Trudeau airport in Montreal on March 2, 2022. Paul Chiasson/The Canadian Press

Sunwing Airlines Inc. owes Ottawa more than $316 million in unpaid federal loans that were issued during the COVID-19 pandemic as a relief measure, according to federal records.

Sunwing, which WestJet is set to acquire, was granted $316.9 million in loans by the federal government in 2020 under the Large Employer Emergency Financing Facility intended to preserve jobs at the pandemic’s outset.

Sunwing has not yet repaid any of the loans, according to records viewed by Blacklock’s Reporter, and the Department of Transport said there was “significant risk” the company wouldn’t be able to repay had WestJet not bought the company out.

“WestJet will be obligated to repay the bulk of Sunwing’s outstanding federal loans promptly upon closing with the remaining travel credit facility loan repaid at its maturity in 2028,” the Department of Transport wrote in a legal notice issued on April 8 under the Canada Transportation Act.

Sunwing’s debt included loans issued by the federal government to ensure that passengers would receive refunds for flights cancelled due to the pandemic’s outbreak.

“Given Sunwing’s precarious situation following the cancellation of much travel and the need to repatriate passengers during the winter 2022 holidays there was a significant risk the company would not be able to repay the loans,” the department wrote.

Sunwing made headlines near the end of 2022 after hundreds of its passengers were affected by flight disruptions caused by winter storms and a breakdown of the airline’s digital communication service. Many customers were stranded for days at vacation destinations outside of the country.

Sunwing issued an apology for the prolonged delays, but Transport Minister Omar Alghabra called the situation “completely unacceptable.”

Following the delays, Sunwing announced in January that it would reduce its flight capacity throughout the month to ensure it could “execute to the highest standards with the least disruption to customers” during the winter season.

Buyout

Two months later, the federal government approved a deal that will see WestJet Airlines Ltd. acquire Sunwing Vacations. The deal was originally proposed in March 2022.

Alghabra said in a statement that decision to approve the buyout was “not taken lightly, especially in light of everything that happened over the holidays for those who flew with Sunwing.”

“After considering the pros and cons, we have made the decision that will allow Sunwing to continue to provide affordable vacation packages to Canadians, create more good jobs and protect current jobs as well as Canadians who have already purchased tickets,” Alghabra said.

Financial terms of the buyout have not been disclosed. WestJet and Sunwing will still be marketed separately going forward.

Alghabra approved the deal with a number of conditions aimed at improving affordability and service within the air-travel sector, but the federal Competition Bureau previously voiced concerns that the buyout will result in higher prices and fewer vacation packages.

“The proposed transaction will result in one of Canada’s largest integrated tour operators being acquired by one of its primary rivals in the provision of vacation packages,” the bureau said in October 2022.

The Canadian Press contributed to this report.