Air Canada posts $1-billion loss as carrier faces ‘darkest period’ in commercial aviation history – The Globe and Mail

The COVID-19 pandemic drove Air Canada to a $1-billion loss in the first quarter as most air travel came to a halt.

Air Canada burned through $880-million in liquidity in the first three months of 2020, as it reduced its schedule by 90 per cent since March 16.

“Our first quarter results reflect the severity and abruptness of the impact that the COVID-19 pandemic has had on Air Canada, which started to be felt across the global airline industry in late January with the suspension by many carriers, including Air Canada, of services to China,” Air Canada said in a statement accompanying its results on Monday morning. “The impact was exacerbated during the month of March with mandated social distancing, unprecedented government-imposed travel restrictions in Canada and around the world and the shutting down of economies.”

Air Canada outlined measures it is taking to preserve its operations, but said a recovery to 2019 revenue levels and capacity is three years away.

“The past quarter was the first in 27 consecutive quarters that we did not report year-over-year operating revenue growth. Our solid January and February results gave us every encouragement that this performance would continue until the sudden and catastrophic impact of COVID-19’s onset in Europe and North America in early March. We are now living through the darkest period ever in the history of commercial aviation,” Air Canada said.

Air Canada said revenue fell by $712-million to $3.7-billion in the first three months of 2020, compared with the year-earlier period. The operating loss was $433-million, compared with a profit of $127-million in the first quarter of 2019.

The airline’s $1-billion net loss, or $4 per share, compares with a profit of $345-million ($1.26) in the same period a year earlier.

Passenger revenue miles fell by 17 per cent.

The World Health Organization declared a global pandemic on March 12 and the Canadian government on March 13 told Canadians to avoid non-essential travel. Ottawa closed the border to international visitors, except for Americans on March 18, and on March 20 expanded the restrictions to include U.S. travellers. Air Canada suspended U.S. flights on April 26.

Air Canada said its annualized second-quarter capacity will be reduced by 85 per pent or 90 per cent, and by 75 per cent in the third quarter.

Air Canada said it is taking steps to ensure it has enough cash to survive, including drawing a $1-billion credit facility, an $820-million loan secured by aircraft and spare engines, and bridge financing worth $780-million.

On top of the cost savings achieved through capacity and workforce reductions, Air Canada said it will save $1-billion through other cost reductions and program deferrals. Air Canada is getting rid of 79 older, less fuel-efficient planes, the Boeing 767, Airbus 319 and Embraer 190 aircraft, a move that reduces costs and simplifies fleet maintenance. Air Canada and its subsidiaries operate 406 planes.

Scotiabank analyst Konark Gupta said Air Canada will consume about $1.4-billion in cash in the second quarter, a figure that increases to $1.5-billion or $17-million a day in a “worst-case scenario” of a total shutdown.

Mr. Gupta said he would be surprised if the Canadian government does not provide financial aid to Air Canada, after the U.S. government announced it would do so.

Air Canada said until June 6 most of its 33,000 employees will receive federal government wage subsidies intended to prevent layoffs. The carrier has operated more than 500 international cargo flights since March 22, after removing seats in some planes to carry freight. Air Canada said it plans to fly as many as 150 cargo flights a week in the second quarter.

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