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Air Canada Profits Suffer Double Whamy From MAX & Coronavirus

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5 years ago

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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.

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.

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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Carry On Canadian Business. Carry On!

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23 hours ago

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October 22, 2024

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Human Resources Officers must be very busy these days what with the general turnover of employees in our retail and business sectors. It is hard enough to find skilled people let alone potential employees willing to be trained. Then after the training, a few weeks go by then they come to you and ask for a raise. You refuse as there simply is no excess money in the budget and away they fly to wherever they come from, trained but not willing to put in the time to achieve that wanted raise.

I have had potentials come in and we give them a test to see if they do indeed know how to weld, polish or work with wood. 2-10 we hire, and one of those is gone in a week or two. Ask that they want overtime, and their laughter leaving the building is loud and unsettling. Housing starts are doing well but way behind because those trades needed to finish a project simply don’t come to the site, with delay after delay. Some people’s attitudes are just too funny. A recent graduate from a Ivy League university came in for an interview. The position was mid-management potential, but when we told them a three month period was needed and then they would make the big bucks they disappeared as fast as they arrived.

Government agencies are really no help, sending us people unsuited or unwilling to carry out the jobs we offer. Handing money over to staffing firms whose referrals are weak and ineffectual. Perhaps with the Fall and Winter upon us, these folks will have to find work and stop playing on the golf course or cottaging away. Tried to hire new arrivals in Canada but it is truly difficult to find someone who has a real identity card and is approved to live and work here. Who do we hire? Several years ago my father’s firm was rocking and rolling with all sorts of work. It was a summer day when the immigration officers arrived and 30+ employees hit the bricks almost immediately. The investigation that followed had threats of fines thrown at us by the officials. Good thing we kept excellent records, photos and digital copies. We had to prove the illegal documents given to us were as good as the real McCoy.

Restauranteurs, builders, manufacturers, finishers, trades-based firms, and warehousing are all suspect in hiring illegals, yet that becomes secondary as Toronto increases its minimum wage again bringing our payroll up another $120,000. Survival in Canada’s financial and business sectors is questionable for many. Good luck Chuck!. at least your carbon tax refund check should be arriving soon.

Steven Kaszab
Bradford, Ontario
skaszab@yahoo.ca

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Imperial to cut prices in NWT community after low river prevented resupply by barges

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1 day ago

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October 22, 2024

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NORMAN WELLS, N.W.T. – Imperial Oil says it will temporarily reduce its fuel prices in a Northwest Territories community that has seen costs skyrocket due to low water on the Mackenzie River forcing the cancellation of the summer barge resupply season.

Imperial says in a Facebook post it will cut the air transportation portion that’s included in its wholesale price in Norman Wells for diesel fuel, or heating oil, from $3.38 per litre to $1.69 per litre, starting Tuesday.

The air transportation increase, it further states, will be implemented over a longer period.

It says Imperial is closely monitoring how much fuel needs to be airlifted to the Norman Wells area to prevent runouts until the winter road season begins and supplies can be replenished.

Gasoline and heating fuel prices approached $5 a litre at the start of this month.

Norman Wells’ town council declared a local emergency on humanitarian grounds last week as some of its 700 residents said they were facing monthly fuel bills coming to more than $5,000.

“The wholesale price increase that Imperial has applied is strictly to cover the air transportation costs. There is no Imperial profit margin included on the wholesale price. Imperial does not set prices at the retail level,” Imperial’s statement on Monday said.

The statement further said Imperial is working closely with the Northwest Territories government on ways to help residents in the near term.

“Imperial Oil’s decision to lower the price of home heating fuel offers immediate relief to residents facing financial pressures. This step reflects a swift response by Imperial Oil to discussions with the GNWT and will help ease short-term financial burdens on residents,” Caroline Wawzonek, Deputy Premier and Minister of Finance and Infrastructure, said in a news release Monday.

Wawzonek also noted the Territories government has supported the community with implementation of a fund supporting businesses and communities impacted by barge cancellations. She said there have also been increases to the Senior Home Heating Subsidy in Norman Wells, and continued support for heating costs for eligible Income Assistance recipients.

Additionally, she said the government has donated $150,000 to the Norman Wells food bank.

In its declaration of a state of emergency, the town said the mayor and council recognized the recent hike in fuel prices has strained household budgets, raised transportation costs, and affected local businesses.

It added that for the next three months, water and sewer service fees will be waived for all residents and businesses.

This report by The Canadian Press was first published Oct. 21, 2024.

The Canadian Press. All rights reserved.

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U.S. vote has Canadian business leaders worried about protectionist policies: KPMG

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1 day ago

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October 22, 2024

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TORONTO – A new report says many Canadian business leaders are worried about economic uncertainties related to the looming U.S. election.

The survey by KPMG in Canada of 735 small- and medium-sized businesses says 87 per cent fear the Canadian economy could become “collateral damage” from American protectionist policies that lead to less favourable trade deals and increased tariffs

It says that due to those concerns, 85 per cent of business leaders in Canada polled are reviewing their business strategies to prepare for a change in leadership.

The concerns are primarily being felt by larger Canadian companies and sectors that are highly integrated with the U.S. economy, such as manufacturing, automotive, transportation and warehousing, energy and natural resources, as well as technology, media and telecommunications.

Shaira Nanji, a KPMG Law partner in its tax practice, says the prospect of further changes to economic and trade policies in the U.S. means some Canadian firms will need to look for ways to mitigate added costs and take advantage of potential trade relief provisions to remain competitive.

Both presidential candidates have campaigned on protectionist policies that could cause uncertainty for Canadian trade, and whoever takes the White House will be in charge during the review of the United States-Mexico-Canada Agreement in 2026.

This report by The Canadian Press was first published Oct. 22, 2024.

The Canadian Press. All rights reserved.

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