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The federal government has begun talks aimed at bailing out the aviation sector, but players in the industry are frustrated by the slow start to negotiations amid the collapse in air travel.

Ottawa has drawn up a list of five key demands in what is expected to be tough negotiations on a COVID-19 rescue package for struggling Canadian airlines, including a call for the carriers to open their books, refrain from cancelling orders for Canadian-made planes, protect vital flight routes and provide refunds to customers for cancelled flights, an amount worth billions of dollars. Cabinet gave authority to Transportation Minister Marc Garneau to reach deals that protect the interests of Canadian travellers and the financial viability of the airline industry, according to a source who has been briefed on the federal strategy. The source is not being identified because they are not allowed to discuss cabinet deliberations.

The aviation industry’s demands vary by company, and include: financial help from taxpayers, preferably in the form of grants or interest-free loans; the national roll-out of a COVID-19 testing regime to allow shorter travel quarantines; a framework to reopen domestic travel, including a plan to identify safe corridors and create domestic bubbles like the one in Atlantic Canada; breaks on fees paid to airports and NavCanada; relief from the costs of the carbon tax on fuel; incentives to buy fuel-efficient aircraft; relief from the demand that all airfares be refunded.

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Formal negotiations begin next week but some preliminary talks happened in recent days with executives from various airlines, including Porter Airlines chairman Robert Deluce, whose airline remains grounded.

However, talks with WestJet Airlines Ltd., Air Canada and other industry players have yet to happen, according to an industry source who is not being identified because they are not authorized to speak publicly on the matter.

James Bogusz, chief executive of Regina Airport Authority, said he is “hopeful” talks on federal aid will begin soon, but “there hasn’t been … any new dialogue with the federal government.”

“I’ve heard nothing. It’s frustrating,” said John McKenna, head of the Air Transport Association of Canada, which represents 75 air operators and dozens of industry stakeholders, including Sunwing Airlines and Flair Airlines.

“Nothing has happened on our side,” said Christophe Hennebelle, a spokesman for Montreal-based leisure carrier Transat. “We are very eager to begin discussions, of course, but there has been no reach-out on the file.”

Mr. Hennebelle said it came as no surprise the government wants to link aid with refunds. Transat is holding $564-million as of July 31 in customers' fares for cancelled flights. The airline would be “delighted to be in a position to refund our customers. If the government wants to help us doing so, we are certainly game,” Mr. Hennebelle said on Friday.

Air Canada Air Canada has $2.3-billion in prepaid fares, including cancelled flights, according to company documents.

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A spokeswoman for Mr. Garneau did not address questions on the timing and subject of the negotiations. “Our government is developing a package of assistance to the air sector,” said Livia Belcea, Mr. Garneau’s press secretary. “Further details regarding any financial assistance would be announced in due course.”

WestJet and Air Canada declined to comment.

As a large country, Canada needs to ensure it has a healthy airline industry to support its economy in addition to the sectors it supports, such as hotels, taxis, airports and travel agencies, said Barry Prentice, a transportation professor at University of Manitoba. Widespread use of a COVID-19 vaccine is needed before demand for travel will return to prepandemic levels, he said.

Mr. Garneau signalled talks were to start in a statement he issued on Nov. 8.

The statement, which came as a surprise to the airline industry and its customers, said any airline aid would come with a significant requirement – that the carriers give back customers' money for flights cancelled amid the pandemic. This marked a reversal for a government that previously said it backed the Canadian Transportation Agency’s statement that vouchers or credits – not refunds – for flights cancelled by airlines were an “appropriate” remedy amid devastating business conditions.

“We will ensure Canadians and regional communities retain air connections to the rest of Canada,” Mr. Garneau said in the release, which was a response to calls Air Canada began making to provincial and federal government officials in the previous days.

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Air Canada had advised governments of its intention to cancel 95 routes, domestic, U.S. and international, and pull out of another nine airports, moves that risked isolating parts of the country, in an effort to reduce its cash burn of about $13-million a day. The cuts were to be announced on Monday morning, when it reported a third-quarter loss of $685-million, the sources said.

In the end, Air Canada backed away from making the cuts, and acknowledged Mr. Garneau’s intention to proceed with sector-specific aid talks. But the airline issued a warning of its own, and signalled the high stakes involved in the negotiations: “We are deferring the additional route suspensions and station closures pending the progress of those discussions."

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