Air Canada is to reduce its fleet by 79 aircraft as it seeks to cap costs and improve its financial position, the airline announced on May 4. This follows on a net loss of $1.049 billion in Q1, down from a 345 million profit last year. It is the first lossmaking quarter after 27 profitable quarters.
The operating loss for the first three months was $433 million, down from a 127 million profit. Revenues were $3.722 billion, down from 4.434 billion. In the press release, Air Canada highlighted the only positive factor in the results, which is a $71 million EBITDA which was still down from 583 million last year.
Air Canada ended the quarter with a negative free cash flow of $-393 million, down from $579 million. Net debts amount to $4.170 billion, up from 3.658 billion.
To improve its cash position, the company has drawn down a combined $800 million as credit facilities for aggregate net proceeds of $1.027 billion. It also secured a $600 million loan secured against aircraft and spares, with net proceeds of $829 million.
In total, Air Canada had $6.523 billion in liquidity by the end of March.
To reduce costs, Air Canada has realized an additional $500 million savings by cutting expenditures, deferring Capex, bringing total savings to $1.050 billion. The share purchase program has been terminated.
Part of the cost reduction-plan is resizing the fleet by retiring older aircraft. At Air Canada, this included its 5 Boeing 767-300ERs, 13 Airbus A319s, and 14 Embraer E190s, while subsidiary Air Canada Rouge will retire its 25 767-300ERs and 22 A319s.
Air Canada is also refinancing 18 of its Airbus A220s by securing a $788 million bridge loan which will be replaced by new long-term arrangements later in the year.
Looking ahead to Q2, Air Canada expects capacity to remain down by -85 to -90 percent and Q3 likely by -75 percent. As was to be expected, the airline has suspended its FY20 guidance.