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Air Canada Profits Suffer Double Whamy From MAX & Coronavirus

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Air Canada announced that the first quarter 2020 EBITDA will be approximately $200 million USD lower than the first quarter of 2019. This is because of the impact the airline has sustained due to the ongoing MAX and coronavirus crisis worldwide.

Still, the Canadian airline expects to have a small increase in EBIDTA by the end of the year. Let’s check it out.

Air Canada expects a hit of 200 million USD in the first quarter due to coronavirus and the MAX crisis. Photo: Air Canada.

Last year, the MAX crisis didn’t hit the Canadians that much

During the first quarter of 2019, Air Canada had 24 Boeing 737 MAX aircraft operating in its routes. Then, tragedy struck for the second time and worldwide regulators grounded the global MAX fleet. It seemed as if the Canadian airline was going to be one of the most affected by the MAX crisis, as it was one of the biggest operators worldwide at the moment. But this wasn’t the case.

The airline managed to report an EBITDA of 3.636 billion USD, an increase of 13 percent in comparison with 2018. Calin Rovinescu, president and CEO of Air Canada, said,

“We generated record revenues in excess of $19 billion and reached record levels of unrestricted liquidity, despite the loss to Air Canada of approximately 25 percent of our narrow-body fleet for the most of the year.”

In 2019, Boeing planned to deliver 12 Boeing 737 MAX to Air Canada, increasing the fleet of the airline up to 36.

But, for now, Air Canada is expecting to receive just six of the 12 undelivered airplanes scheduled in 2019. The remaining six will arrive in 2021. And the 14 undelivered MAX aircraft originally scheduled for 2020 will be delivered in 2021, said the carrier.

One way or another, Air Canada managed to surf through the uncertainty and gain some profit along the way. Then, 2020 arrived, with a different scenario.

Air Canada B737 MAX
The airline expects to receive six Boeing 737 MAX in 2020. Photo: Air Canada.

2020 starts with uncertainty

Calin Rovinescu said that 2020 started with uncertainty due to the ongoing grounding of the MAX. He added to this scenario the emerging economic and geopolitical risks and route suspensions resulting from the coronavirus, or COVID-19 virus.

Currently, Air Canada has suspended its services to mainland China and Hong Kong. The carrier is only a small player in a market that has reached the point of being smaller than Portugal’s aviation market. Still, there is a big Chinese community in Canada, mainly in the west, which is currently being underserved due to the worldwide crisis.

And when does Air Canada expect to be back in China? According to its outlook, mainland China and Hong Kong Services will be fully recovered by the third quarter of 2020.

Air Canada A220
Will the A220 launch Air Canada’s connectivity? Photo: Air Canada.

Nevertheless, Air Canada expects a great 2020

Air Canada has a bright future ahead. Not only the carrier will bring back all its Boeing 737 MAX fleet, but it also has a nice thing going with the new Airbus A220. Although the A220 is not a substitute for the MAX, it is at least 20% more fuel-efficient. And it will allow the airline to open up new routes in North America.

Let’s remember what the airline said last month about the Airbus A220,

“This aircraft is a game-changer for Air Canada as there is simply no rival in this category. The A220 will further strengthen our position on transborder and transcontinental markets and be instrumental in our continued growth.” 

Finally, for the full year 2020, Air Canada projects an EBITDA margin of approximately 19 percent. This would result in a small increase in EBITDA  versus the reported in 2019. Also, the airline expects to increase its ASM capacity between 1 and 2 percent. The airline also expects to complete the merger with fellow Canadian carrier, Air Transat.

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RBC warns house price correction could be deepest in decades | CTV News – CTV News Toronto

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A housing correction, which has already led to four consecutive months of price declines in the previously overheated Greater Toronto Area market, could end up becoming “one of the deepest of the past half a century,” a new report from RBC warns.

New data released by the Toronto Regional Real Estate Board (TRREB) last week revealed that the average benchmark price for a home in the GTA fell six per cent month-over-month in July to $1,074,754.

Sales were also down a staggering 47 per cent from July, 2021.

In a report published on Aug. 4, RBC Senior Economist Robert Hogue said recent data from real estate boards underlines that higher interest rates are beginning to take a “huge toll” on the market.

Hogue said that with further hikes to come, prices will likely continue to slide in the coming months.

That prediction, it should be noted, goes against a report from Royal LePage last month which painted a rosier forecast for sellers in which values would more or less holding for the rest of the year following some declines in the second quarter.

“Our expectations for further hikes by the Bank of Canada—another 75 basis points to go in the overnight rate by the fall— will keep chilling the market in the months ahead,” Hogue said. “We expect the downturn to intensify and spread further as buyers take a wait-and-see approach while ascertaining the impact of higher lending rates. Canada’s least affordable markets Vancouver and Toronto, and their surrounding regions, are most at risk in light of their excessively stretched affordability and outsized price gains during the pandemic.”

The Bank of Canada has hiked the overnight lending rate by 225 basis points since March and has warned that further hikes will be necessary given that inflation remains at a near 40-year high.

In his report, Hogue pointed out that the housing correction “now runs far and wide across Canada” but he said that it is particularly pronounced in the costlier markets of Toronto and Vancouver.

In fact, Hogue said that housing resale activity in Toronto is at its slowest pace in 13 years, outside of the early days of the COVID-19 pandemic.

The stockpile of available homes is also up 58 per cent from a year ago, he noted.

“With more options to choose from and higher interest rates shrinking their purchasing budgets, buyers are able to extract meaningful price concessions from sellers,” he said, pointing out that the average price of a home in the GTA is down 13 per cent from March. “We expect buyers to remain on the defensive in the months ahead as they deal with rising interest rates and poor affordability.”

While Hogue did say that condos in the City of Toronto are likely to remain “relatively more resilient” he said that prices elsewhere will continue to fall for the time being, especially in the 905 belt “where property values soared during the pandemic.”

The July data from TRREB suggested that the average price of a home in the GTA was still up one per cent from July, 2021.

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Commuters face GO transit cancellations, possible strike – CityNews

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Canada Revenue Agency plans email blitz to get Canadians to cash outstanding cheques worth $1.4-billion – The Globe and Mail

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The Canada Revenue Agency (CRA) is planning a massive e-mail notification campaign to reach Canadians across the country who have uncashed cheques worth a net $1.4-billion.

The e-mail notifications will target recipients of the Canada child benefit and related provincial and territorial programs, as well as recipients of the GST/HST credits and the Alberta Energy Tax Refund.

The CRA said it plans to send approximately 25,000 e-mails in August, another 25,000 in November and a further 25,000 e-mails by May, 2023.

However, even without receiving an e-mail notification, the agency said a taxpayer can check if they have a cheque by logging into My Account, a secure portal on its website to check if they have an uncashed cheque over a period of six months. It added that representatives can also view uncashed cheques of their clients.

Each year, the CRA said it issues millions of payments to Canadian taxpayers in the form of refund benefits. These payments are issued by either direct deposit or by cheque.

“Over time, payments can remain uncashed for various reasons, such as the taxpayer misplacing the cheque or even a change of address which did not allow for delivery,” the agency said in a statement.

The CRA said since the e-mail notification initiative was first launched in February, 2020, about two million uncashed cheques valued at $802-million were redeemed by May 31, 2022.

The average amount per uncashed cheque is $158 with some of them dating as far back as 1998, the agency said.

As of May, 2022, there were an estimated 8.9 million uncashed cheques with the CRA. In May, 2019, about five million Canadians had an estimated 7.6 million uncashed cheques.

“As government cheques never expire or stale date, the CRA cannot void the original cheque and re-issue a new one unless requested by the taxpayer,” the statement read. “These upcoming e-notifications are to encourage taxpayers to cash any cheques they have in their possession.”

The agency said taxpayers can register for the direct deposit option on its website to receive payments directly into their bank accounts.

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