SAO PAULO/PARIS (Reuters) – Brazilian planemaker Embraer SA (EMBR3.SA) has been thrust into an uncertain future with no immediate plan B, while not ruling out seeking a bailout after Boeing Co (BA.N) jettisoned a $4.2 billion commercial aerospace tie-up amid the coronavirus crisis.
FILE PHOTO: Air Astana Embraer E190-E2 aircraft with a snow leopard livery is seen at Almaty International Airport, Kazakhstan January 21, 2020. REUTERS/Pavel Mikheyev
The company’s shell-shocked chief executive, in the job for a year with little aerospace experience, sought to rally staff after the board held late-night talks to review the collapse of plans for surviving mounting aerospace competition.
“Our history is full of difficult moments, and we have overcome all of them,” Francisco Gomes Neto told Embraer’s 20,000 staff before giving them a thumbs up.
But Embraer now faces a historic crisis with its isolation reinforced by the breakup – two years after Europe’s Airbus (AIR.PA) absorbed Embraer’s main competitor, the Canadian-designed A220.
“For Embraer, it could be very damaging,” said Teal Group consultant Richard Aboulafia, noting it was the only significant independent jetmaker.
“It’s hard to pressure your suppliers when the volume you’re offering is a fraction of your competition’s”.
Embraer’s immediate aim is to reassure investors. It pledged cost savings and said it had solid liquidity.
It also tore up arguments previously used to persuade unions and regulators to back the deal, saying it could survive without Boeing rather than stating the deal would be its “salvation”.
The former state-owned company has not asked for a bailout but says it is open to “complementary” sources of financing.
Brazilian companies, including airlines and automakers, are in bailout discussions.
Embraer “will need strong government support to recover the (separation) expenses and recover from the economic crisis caused by coronavirus,” said Aurelio Valporto, who heads minority shareholder group Abradin and opposed the deal.
Embraer had two main pitches for investors that have now vanished.
First, it would pay $1.6 billion in dividends from the sale. Second, it would receive enough cash to wipe debts clean and rejuvenate defense and executive-jet units. As a revamped company, Embraer would get a fresh start.
Executives also hoped Boeing’s marketing would be a silver bullet for the commercial arm, to be 80%-owned by Boeing.
Instead, Embraer now has a crisis committee that meets daily and no end in sight for its troubles.
That, analysts say, could not come at a worse time.
Sales of its E2 have lagged. Overall jet demand has vanished due to coronavirus. Now, crashing oil prices have further weakened the case for new jets, sold mainly on fuel efficiency.
CHINA WILD CARD
Questions have also been raised over how long high-profile Embraer jetliner CEO John Slattery, who aggressively marketed the E2 jet while lobbying for regulatory approval, will stay without the deal. He did not respond to a request to comment.
In a Twitter post, he said, “Despite this uncertain period in our industry, I’m confident Embraer will emerge stronger.”
On the positive side, analysts expect demand for small jets like the A220 or Embraer’s E2 to lead any future rebound.
The breakup may also spark a distracting legal battle.
In Brazil, alarm bells rang when Boeing lawyers began quizzing Brazilian counterparts on paperwork in recent weeks.
Industry sources said Boeing needed room to maneuver as it seeks U.S. government support for the U.S. aerospace industry. With the crisis expected to resurrect economic barriers, it was seen in a corner over moves to acquire thousands of Brazilian engineers while drawing up plans to lay off its own staff.
“You can’t easily go to Congress and ask for support and spend the money on an acquisition,” a senior source said.
Embraer says Boeing scuppered the deal on technicalities because of its own financial problems. Boeing says it pulled out only because Embraer failed to meet conditions. But the row itself could be damaging.
“Since it came apart in such vitriolic fashion, it’s hard to believe they can pick up the pieces and try again,” Jerrold Lundquist, managing director of The Lundquist Group, said.
That leaves limited options for Embraer though none has been discussed as a serious plan B.
One potential wild card is China, which almost beat Airbus to the A220 program and which remains on the hunt for ways of accelerating its own aerospace ambitions.
“From a strategic point of view, it is an option but it could be politically problematic,” Lundquist said.
Members of the inner circle of Brazilian President Jair Bolsonaro have repeatedly attacked China over coronavirus.
The breakup also leaves uncertainty for Embraer employees, many of whom were expected to work on future Boeing programs.
Embraer had already furloughed more than 90% of its main Brazil plant due to the crisis.
It had also spent $30 million on a new headquarters as it prepared to carve out the commercial unit.
“Our teams were working together, deciding things together. There were thousands of people working on joint decisions, all for it to end this way,” a person close to the discussions said.
Reporting by Marcelo Rochabrun in Sao Paulo, Tim Hepher in Paris and Rodrigo Viga Gaier in Rio de Janeiro; Additional reporting by Tatiana Bautzer in Sao Paulo; Editing by Lisa Shumaker
Canadian airlines could ‘fail’ if forced to refund passengers
Transport Minister Marc Garneau says that Canadian airlines could go bankrupt if the ailing industry is compelled to refund passengers billions of dollars for flights cancelled due to the pandemic.
“I have said many times that I have enormous sympathy for those who would have preferred to have a cash refund in these difficult circumstances. It is far from being an ideal situation,” Garneau told a press conference earlier today.
“At the same time, if airlines had to immediately reimburse all cancelled tickets, it would have a devastating effect on the air sector, which has been reeling since the COVID 19 pandemic started.”
Garneau was doubling down on a message he delivered to the House of Commons’ pandemic committee on Thursday, when he warned MPs that if airlines “had to reimburse at this time, some of them could fail.”
The minister said today it’s his responsibility to help Canada’s airlines survive the pandemic.
“It is so essential for this country,” he said. “This is the second largest country on Earth, with its distances and remote areas, and we expect and need an airline industry in this country.”
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But his response isn’t sitting well with Canadians struggling financially during the pandemic who argue it’s their right as consumers to get their money back for flights they never took.
“It’s very disappointing and frustrating,” said Tammie Fang, a health care essential worker in B.C. “My rights as a consumer have been put aside to help balance the airline industry.”
Fang works at a New Westminster hospital assisting with open-heart surgeries. She said she spends much of her spare time calling and emailing Air Transat seeking a refund of roughly $500 for a flight to Toronto she never took. She describes it as an extra burden during an already stressful and financially challenging time.
“It’s disheartening,” she said. “It’s unbelievable how much effort we have to put in.”
<p class=”canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm” type=”text” content=”Airlines’ survival versus consumers’ rights” data-reactid=”43″>Airlines’ survival versus consumers’ rights
Canada’s airline industry has been hit particularly hard by the pandemic, and most of the country’s airline fleet is sitting idle at airports across the country. Airlines are losing 90 per cent of their normal revenue streams and some have put their operations completely on pause.
At the same time, pressure is mounting on the federal government to step in and force airlines to pay back passengers who also are struggling financially. Two petitions with more than 30,000 signatures combined have been submitted to Parliament in recent weeks calling on the government to demand that airlines tapping into taxpayer-funded government supports reimburse grounded passengers.
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For the most part, Canadian airlines are offering those passengers travel vouchers redeemable for two years. Air Canada also announced last week that it’s allowing people to transfer their tickets to others, which could permit ticket holders to sell them. The Canadian Transportation Agency has said offering vouchers could be a reasonable measure in the current circumstances.
Garneau’s office said it would cost airlines billions of dollars to refund customers. When CBC asked Transport Canada for specific numbers, it was told the figures the government receives from airlines amount to proprietary information that it isn’t authorized to release.
Air Canada’s books are open, since it’s a publicly traded company. It has about $2.6 billion tied up in ticket sales for future travel over the next year.
On March 16, the airline said its current liquidity level was $6.3 billion — a record level — and its balance sheet was solid. Since then, Air Canada has said it’s burning $22 million a day in operating costs and plans to reduce its workforce by 50 to 60 per cent. The company said a dramatic drop in demand during the pandemic caused the airline to slash its flight capacity by 95 per cent.
<p class=”canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm” type=”text” content=”Government in talks with airlines and consumers” data-reactid=”75″>Government in talks with airlines and consumers
Outside Rideau Cottage today, Prime Minister Justin Trudeau repeated a message he’s delivered in the past — that the government has to strike the right balance between keeping airlines afloat and preserving consumers’ rights.
“I hear clearly the concerns that Canadians have around their air tickets,” said Trudeau. “We will continue to work with the industry and with concerned groups of Canadians to ensure that we find a fair way through this.
“But I know Canadians at the same time want to make sure we continue to have an airline industry after this very difficult pandemic.”
The government is in talks with airlines and is looking to see what other countries have done with travel refunds. It’s expected to deliver an update on the file in the coming weeks.
Source: Yahoo News Canada
Edited By Harry Miller
Saint John's cruise ship season officially cancelled as feds extend ban – CBC.ca
Minister of Transport Marc Garneau has extended the cruise ship ban until at least Oct. 31, meaning no cruise ships will be arriving in Saint John this season.
In a press conference Friday, Garneau said cruise ships with overnight accommodations and capacity of over 100 people, including passengers and crew, will be prohibited from operating in Canadian waters until then. The ban was previously set to expire in July.
Port Saint John CEO Jim Quinn said this ban extension means an end to this year’s season for Saint John.
“[It’s] not totally unexpected,” he said. “We respect … the decisions that the government makes because it’s all about protection of our population.”
Quinn said the port was expecting record-setting cruise revenue in 2020, but COVID-19 restrictions nationally and internationally have already cost the city 80,000 visitors. That’s about half of the expected visitors the cruise ships were set to bring.
There were 51 calls still on the schedule between July 31 and Oct. 27.
“The government has said that cruising will not be taking place in Canada before Oct. 31. So I guess… that means there will be no cruise vessels coming into Saint John this season”
In response to a question about what the federal government is planning to help the tourism sector, Garneau said the minister responsible for tourism, Mélanie Joly would be the best person to answer that question.
“I agree with you there will be a serious impact on the tourism industry, especially for cruise ships,” he said. “This is something that is important for some provinces in our country, unfortunately, because we have decided to minimize risk.”
“There will be economic impacts.”
Quinn said the port is hoping there will be a vaccine by the time next season starts. But it’s still too soon to prepare for a cruise ship season if there is no vaccine by 2021.
“It’s too early for us to contemplate that in terms of doing anything with next season,” he said. “The cruise lines are very focused on doing all of the right things and to ensure that safety procedures and protocols are in place to regain the confidence of of the cruising public and officials and communities that they visit.”
He said next season is a full twelve months away “so a lot of water to go under the bridge between now and then.”
He said there are no scheduled Port Saint John layoffs, but the port won’t be hiring the usual seasonal and temporary workers involved with the cruise ship visits.
Alberta announces 13 new COVID-19 cases, 1 more death Saturday – Global News
Alberta Health announced 13 new lab-confirmed COVID-19 cases in the province on Saturday, bringing the total number of active cases to 604 and the total number of confirmed cases to 6,992.
The province reported one additional death.
The province said 53 people are in hospital, with five of them in intensive care.
As of Saturday, 661 cases stemmed from an unknown exposure.
In total, 6,245 Albertans have recovered from COVID-19, Alberta Health said.
- Calgary zone: 461 active cases and 4,295 recovered
- South zone: 44 active cases and 1,182 recovered
- Edmonton zone: 67 active cases and 464 recovered
- North zone: 27 active cases and 200 recovered
- Central zone: two active cases and 95 recovered
- yet-to-be-confirmed zones: three active cases and nine recovered
Alberta Health said one new death was reported Saturday while one previous death was determined not to be related to COVID-19, meaning the death toll stands at 143.
The latest death was a man in his 70s at Intercare Brentwood Care Centre in Calgary, Alberta Health said.
- 104 in Calgary zone
- 16 in North zone
- 13 in Edmonton zone
- nine in South zone
- one in Central zone
Alberta Health said there are 62 active cases and 657 recovered cases at continuing care facilities, adding that 109 residents have died.
Mental health funding update
On Saturday, the province provided an update on $21.6 million in funding that will expand online and virtual resources for mental health and addiction challenges because of the pandemic. Last month, the government said it was $21.4 million, which was a typo, according to Kassandra Kitz, the press secretary for Mental Health and Addictions.
The government said this money is the first portion of the $53-million COVID-19 mental health action plan announced in April.
$21.6M funding breakdown:
- expand Kids Help Phone and crisis text line – $1.8 million (previously announced)
- expand Addiction Helpline and the Mental Health Helpline – $9.6 million (previously announced)
- expand 211 – $3 million (previously announced)
- Big White Wall – $1 million
- InnoWell – $2 million
- community-based supports – $3 million
- about $1.2 million in capital costs
Associate Minister of Health and Addictions Jason Luan said that many Albertans are in need of mental health and addiction recovery supports during the pandemic — and when it’s over.
“This funding is giving more people free access to supports 24/7, and it’s enabling our government to work with our sector partners to develop other innovative supports,” he said in a statement.
“We are in this together and we will support Albertans every step of the way.”
Since the end of March, the Addiction Helpline (1-866-332-2322) has responded to more than 1,000 calls and the Mental Health Helpline (1-877-303-2642) has responded to more than 3,400 calls, according to the Alberta government.
The Kids Help Phone (1-800-668-6868) experienced about a 50 per cent increase in demand for its texting service (text CONNECT to 686868) since the start of the pandemic, the province said.
In April, Alberta 211 responded to more than 2,700 calls — more than 400 of which were about mental health and substance use, the government said.
Alberta Health said testing is now available to all Albertans, whether they have COVID-19 symptoms or not.
© 2020 Global News, a division of Corus Entertainment Inc.
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