Air Canada has ended 2020 with a record-loss of C$-4.647 billion, compared to a C$1.476 billion profit the previous year. The “catastrophic impact of Covid-19 and government-imposed travel restrictions and quarantines” to Canada and between states have cost the airline 73 percent in passengers carried, it reported on February 12.
Air Canada reported a full-year operating loss of C$-3.776 billion and revenues of C$5.833 billion, the latter down from C$19.131 billion. Capacity for the year was down by an average of 67 percent.
At the HY20-result webcast last Summer, Air Canada called on the government to relax travel restrictions and replace them with scientific-based pre-flight testing. To no avail, as Canada has kept its travel bans that prohibit foreign nationals to enter the country, quarantine for fourteen days, and interprovincial restrictions were upheld for most of the year.
This January, new measures have come into effect, like a mandatory negative PCR test for travelers from abroad entering Canada, in addition to fourteen days of full mandatory quarantine. International flights have to arrive at four airports (Toronto, Montreal, Calgary, and Vancouver), while flights to Mexico and the Caribbean have been suspended until April 30.
Because of this, Air Canada had reduced its Q1 capacity by 85 percent compared to 2019 levels, so the year of woe continues in 2021.
Workforce reduced by half
Looking back on 2020, the airline reduced its workforce by half or over 20.000 (1.700 more job cuts were announced in January) and dismantled its global network that took ten years to construct. Even the domestic network has suffered, with many regional airfields no longer served. In an aggressive program, it slashed C$1.7 billion in costs. Reductions included the retirement of 79 older generation aircraft like the Boeing 767, Airbus A319, and Embraer E190, on which a C$283 million non-cash impairment was made. By December 31, Air Canada operated 169 aircraft, Air Canada Rouge 39, and Air Canada Express 136.
Air Canada received C$554 million under the Canada Emergency Wage Subsidy scheme to support its workforce, but the airline stresses that this has been the only financial support it has received from the government. It is expecting some form of assistance this year after the Trudeau administration said in late 2020 that it would develop a package to help the national airline, airport, and aerospace industry. While discussions are advancing, Air Canada is cautious about the outcome, although CEO Calin Rovinescu (who will depart the airline on February 15) said he is “more optimistic on this front for the first time.”
Fleet restructuring saves three billion
Capital expenditures have been reduced by C$3.0 billion until 2023, mainly by restructuring its fleet and renegotiating orders and deliveries. As reported earlier in the year, Air Canada has deferred deliveries of eighteen A220-300s that were originally set to arrive this year and 2022. Orders for twelve made in Canada jets have been canceled. A bridge financing facility worth C$788 million was secured for the first eighteen aircraft.
In November, the carrier reduced its order for the Boeing MAX 8 by ten and deferred deliveries of the final sixteen over late 2021 to beyond the 2023 period. This amendment followed an initial order revision and cancelation of eleven MAX 9s in the first quarter. This February 1, the airline has taken out the first batch of MAX 8s back in service out of the 24 that have been in storage.
By the end of 2020, Air Canada had C$8.013 billion in unrestricted liquidity, thanks to a series of transactions worth C$6.780 billion that included public and private offerings in June and the arrangement of new credit facilities in September. In two so-called EETC trust certificates, it secured C$740 million in proceeds secured against sixteen aircraft. Nine MAX 8s have been sold and leased back to generate C$485 million. The company has another C$1.7 billion in unencumbered assets. Air Canada burnt C$12 million in cash per day in Q4 and this expected to increase to C$15-17 million during Q1 as a result of the new travel restrictions. Net debt was C$4.976 billion, up from C$2.841 billion.
Air Transat deal needs to be completed
Air Canada said that its amended agreement to acquire Air Transat still needs to be completed no later than February 15, although this date could be extended. The transaction remains subject to certain conditions, including the ongoing approval process of regulatory authorities. On February 12, Air Transat reported that the government has approved the revised acquisition agreement, subject to the implementation of significant undertakings’ by Air Canada. The national carrier must demonstrate that effective competition remains after the acquisition and has to ensure that public interest benefits like maintaining the Air Transat brand and jobs, its headquarters in Quebec, and the launch of new routes. The agreement also needs approval from the European Commission, expected in the first half of this year.