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Transport Minister Marc Garneau says airlines must refund customers' money for flights cancelled in the COVID-19 pandemic before the carriers receive any federal government aid.

The government is readying a long-awaited package of financial bailouts for Canadian airlines, airports and the aerospace industry, which have seen customer demand and traffic plunge owing to fears of catching the deadly virus, border closings and travel quarantines. Negotiations are to begin this week, and will include a requirement that customers get their money back for cancelled flights, Mr. Garneau said in a statement.

Canada’s airlines have, in most cases, collectively hung on to billions of dollars in fares for flights that never happened, offering credits instead and angering thousands of customers. The carriers face financial straits as about 90 per cent of flights have been grounded, while some, including Porter Airlines, have suspended all service.

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On Sunday, Mr. Garneau signaled airlines that want government help will have pay back customers. “Before we spend one penny of taxpayer money on airlines, we will ensure Canadians get their refunds,” he said in the statement, without elaborating.

“Wow,” said John Gradek, who teaches aviation leadership at McGill University. “That’s putting a line in the sand, isn’t it? He’s making a definitive statement in terms of what has to be done.”

The Canadian Transportation Agency has received about 8,000 complaints from airline customers since mid-March, when airlines cancelled most of their flights and governments closed borders and issued stay-at-home advisories. Most carriers have added a few flights since the spring, but cancellations continue amid low demand owing to a resurgent virus and travel restrictions.

Canada’s borders are closed to most non-essential travelers, and those who enter are required to self-isolate for 14 days.

“We have heard from many Canadians who have been negatively affected,” Mr. Garneau’s statement said. “When the unprecedented pandemic broke out in the spring, Canadians who had already booked travel ended up stuck with vouchers for trips they could not take instead of getting refunds. They found themselves in a situation where they have given thousands of dollars in interest-free loans to airlines.”

He said the government will ensure Canadians and regional communities retain air connections to the rest of Canada, and that air carriers maintain their status as key customers of Canada’s aerospace industry.

“Any assistance the government of Canada provides will come with strict conditions to protect Canadians and the public interest,” the statement said.

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Mr. Garneau was not available on Sunday for an interview.

WestJet Airlines Ltd. recently broke ranks with its rivals, offering refunds to some customers who paid for flights that were cancelled because of the pandemic. The refunds will take as long as nine months to arrive, and do not apply if the customer cancelled. “We will evaluate this afternoon’s statement from the government of Canada and will await greater clarity on what support for the aviation sector might include,” WestJet said in a statement on Sunday.

Air Canada has said it has provided more than $1-billion in refunds where required by law, in Europe and the United States, but generally offers credits for cancelled domestic flights. It has about $2.4-billion in prepaid fares, according to its most recent financial report. The airline had more than $9-billion in liquidity as of June 30, but has been spending about $16-million a day to keep operating, and posted a loss of $1.7-billion in the second quarter. (Air Canada is scheduled to report its third-quarter results on Monday morning.)

An Air Canada spokesman declined to comment on Sunday, and pointed to a statement by the National Airlines Council of Canada, an industry group that said it welcomed the government’s efforts to stabilize the industry but did not address the question of refunds.

The statement quotes Mike McNaney, head of the group, as saying: “Airlines are struggling to remain viable because of the economic chaos created by COVID-19.”

Mr. McNaney could not be immediately reached by phone on Sunday.

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Montreal-based leisure airline Transat AT Inc., which has $564-million in non-refunded fares, said the government aid will help it reimburse customers, and it is eager to learn about the package. “Most of our foreign competitors have received massive aid from their governments many months ago,” spokesman Christophe Hennebelle said.

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