As Canada grapples with a second wave of the novel coronavirus pandemic, experts say the airline industry needs aid from the government quickly, if it is going to recover.
On Wednesday, WestJet announced it would be “indefinitely” suspending flights across Atlantic Canada and to Quebec City as the COVID-19 outbreak continues to wreak havoc on the travel industry.
In total, more than 100 flights made to the region will be “eliminated.” WestJet says that is equivalent to nearly 80 per cent of its seat capacity to Atlantic Canada.
Ed Sims, president and CEO of WestJet, said the lack of travel demand “combined with domestic quarantines means that sadly we can no longer maintain our full Canadian network of service.”
Robert Kokonis, president of AirTrav Inc., said the announcement from WestJet is just a “precursor” of “much more dire news to come” regarding Canada’s aviation sector if the federal government doesn’t intervene soon.
“We’re going to see unravel what took our country’s top carriers not years, but decades to build, and it’s all going to unravel within a matter of months,” he told Global News. “It’s going to be a massive impact on jobs, interrelated ability of our carriers to connect Canada with the world unless we do something.
“So today’s announcement is just the leading edge, unless we do something fast.”
What’s more, WestJet is not the only airline in Canada to signal it is having difficulties as the pandemic continues.
On Tuesday, Toronto’s Porter Airlines announced it would be extending its flight suspension to Dec. 15.
In a news release on Sunday, Air Canada said it had agreed to revised terms with Transat AT — parent company of Air Transat — to pay $5 per share for the company.
The new deal marks a sharp drop from the $18 per share originally pledged in the takeover bid.
Kokonis said the industry will not be able to recover without the help of the federal government.
“We’ve seen $123 billion of aid provided by governments around the world directly to the airline sector,” he said. “We’ve seen zero in this country.”
“So unless the federal government thinks that we can rebuild the sector in a matter of a year or two, they’re dreaming.”
The federal government did create the The Large Employer Emergency Financing Facility (LEEFF), which offers large employers loans starting at $60 million. However, Kokonis said the proposed interest rates — at six per cent in the first year increasing to eight the following year — were “not tenable” for Canada’s air carriers.
Earlier this month, three unions representing thousands of the country’s airline workers called on the government for $7 billion in aid for the industry.
Kokonis, however, said airlines are not looking for bailouts, rather “loan guarantees” at an “attractive rate of interest” of about one or one and a half per cent.
He said the industry also needs support from government when it comes to testing for the virus.
“We need to have backstop loans [and] support from the government as far as rapid testing goes,” he said. “We’re not looking for grants, we’re not looking for free money, we’re not looking for bailouts.”
A monopoly in Canada’s airline industry?
Ambarish Chandra, associate professor of economics at the University of Toronto, told Global News that WestJet cutting its services back means the country’s other main airline, Air Canada, could monopolize on both domestic and international routes.
This means Canadians may have less choices when it comes to who they want to fly with once the pandemic is over.
“I’m sure it’s disappointing for travellers and for people who want choice and people are going to see service cut back in their communities,” he said.
“But, you know, you can understand why WestJet is making these decisions and why, you know, other airlines are making these decisions.”
A ‘new normal’
Airline pilot Dominic Daoust said he was “not surprised” by WestJet’s announcement.
“This news that we’re getting today, I think it’s a reminder of the state of the industry,” he told Global News. “And unfortunately, I think it tells us that things are going to get a little bit worse for the industry before it gets better.”
However, Daoust said he is “optimistic” that things will improve.
“I think that eventually the airline industry is going to pick up again,” he said. “Before all this, you know, if you go back a year ago the airline industry in Canada and worldwide was really booming.”
Daoust said before the COVID-19 outbreak there was a shortage of pilots, route frequency was increasing and demand was high.
“Now this pandemic hit, and everything kind of just ground to a halt,” he said. “And now we we have to weather that storm.”
He said until there’s some kind of “drastic change” in the pandemic, or the government is “willing to subsidize the airlines to get them moving again,” the industry will have to wait it out.
However, Daoust said he thinks the demand for travel “is still there,” adding that once a treatment or vaccine is developed to treat COVID-19, he is confident the industry will begin to rebound.
But it’s still unclear what exactly that will look like.
Kokonis said he doesn’t think the industry will return to how it was before the pandemic, adding that Canadians are likely to see a “new normal.”
“We’re going to see some downsizing permanently across the industry as some carriers around the world go bankrupt,” he said. “We hope we don’t see this in Canada.”
He said in the next three years, carriers that are lower in cost, and that focus on leisure travel are likely going to “do better.”
The long-haul premium travel market will likely be the slowest to recover, he said.
“But it’s going to take a minimum of five years, I think, to get back to kind of where we were [in] 2018, [or] 2019,” Kokonis said. “But even at that, we’re going to see some some systemic, lasting changes rippled through our industry.”
Chandra said some parts of the industry may never recover.
“There’s reason to believe that business travel in particular might never recover because many employers might realize that, you know, meetings online or on Zoom just as good as face to face meetings,” he said. “They might decide not to send their employees to trade shows or conventions or client meetings or site visits because they realize (they) aren’t needed, at least not in the numbers as before.”
He said these are all things the government should take into consideration when deciding if it is appropriate to bail out the airline industry.
MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.
The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.
The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.
Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.
This report by The Canadian Press was first published Sept. 12, 2024.
Dollarama Inc.’s food aisles may have expanded far beyond sweet treats or piles of gum by the checkout counter in recent years, but its chief executive maintains his company is “not in the grocery business,” even if it’s keeping an eye on the sector.
“It’s just one small part of our store,” Neil Rossy told analysts on a Wednesday call, where he was questioned about the company’s food merchandise and rivals playing in the same space.
“We will keep an eye on all retailers — like all retailers keep an eye on us — to make sure that we’re competitive and we understand what’s out there.”
Over the last decade and as consumers have more recently sought deals, Dollarama’s food merchandise has expanded to include bread and pantry staples like cereal, rice and pasta sold at prices on par or below supermarkets.
However, the competition in the discount segment of the market Dollarama operates in intensified recently when the country’s biggest grocery chain began piloting a new ultra-discount store.
The No Name stores being tested by Loblaw Cos. Ltd. in Windsor, St. Catharines and Brockville, Ont., are billed as 20 per cent cheaper than discount retail competitors including No Frills. The grocery giant is able to offer such cost savings by relying on a smaller store footprint, fewer chilled products and a hearty range of No Name merchandise.
Though Rossy brushed off notions that his company is a supermarket challenger, grocers aren’t off his radar.
“All retailers in Canada are realistic about the fact that everyone is everyone’s competition on any given item or category,” he said.
Rossy declined to reveal how much of the chain’s sales would overlap with Loblaw or the food category, arguing the vast variety of items Dollarama sells is its strength rather than its grocery products alone.
“What makes Dollarama Dollarama is a very wide assortment of different departments that somewhat represent the old five-and-dime local convenience store,” he said.
The breadth of Dollarama’s offerings helped carry the company to a second-quarter profit of $285.9 million, up from $245.8 million in the same quarter last year as its sales rose 7.4 per cent.
The retailer said Wednesday the profit amounted to $1.02 per diluted share for the 13-week period ended July 28, up from 86 cents per diluted share a year earlier.
The period the quarter covers includes the start of summer, when Rossy said the weather was “terrible.”
“The weather got slightly better towards the end of the summer and our sales certainly increased, but not enough to make up for the season’s horrible start,” he said.
Sales totalled $1.56 billion for the quarter, up from $1.46 billion in the same quarter last year.
Comparable store sales, a key metric for retailers, increased 4.7 per cent, while the average transaction was down2.2 per cent and traffic was up seven per cent, RBC analyst Irene Nattel pointed out.
She told investors in a note that the numbers reflect “solid demand as cautious consumers focus on core consumables and everyday essentials.”
Analysts have attributed such behaviour to interest rates that have been slow to drop and high prices of key consumer goods, which are weighing on household budgets.
To cope, many Canadians have spent more time seeking deals, trading down to more affordable brands and forgoing small luxuries they would treat themselves to in better economic times.
“When people feel squeezed, they tend to shy away from discretionary, focus on the basics,” Rossy said. “When people are feeling good about their wallet, they tend to be more lax about the basics and more willing to spend on discretionary.”
The current economic situation has drawn in not just the average Canadian looking to save a buck or two, but also wealthier consumers.
“When the entire economy is feeling slightly squeezed, we get more consumers who might not have to or want to shop at a Dollarama generally or who enjoy shopping at a Dollarama but have the luxury of not having to worry about the price in some other store that they happen to be standing in that has those goods,” Rossy said.
“Well, when times are tougher, they’ll consider the extra five minutes to go to the store next door.”
This report by The Canadian Press was first published Sept. 11, 2024.
TORONTO – The U.S. Consumer Financial Protection Bureau has ordered TD Bank Group to pay US$28 million for repeatedly sharing inaccurate, negative information about its customers to consumer reporting companies.
The agency says TD has to pay US$7.76 million in total to tens of thousands of victims of its illegal actions, along with a US$20 million civil penalty.
It says TD shared information that contained systemic errors about credit card and bank deposit accounts to consumer reporting companies, which can include credit reports as well as screening reports for tenants and employees and other background checks.
CFPB director Rohit Chopra says in a statement that TD threatened the consumer reports of customers with fraudulent information then “barely lifted a finger to fix it,” and that regulators will need to “focus major attention” on TD Bank to change its course.
TD says in a statement it self-identified these issues and proactively worked to improve its practices, and that it is committed to delivering on its responsibilities to its customers.
The bank also faces scrutiny in the U.S. over its anti-money laundering program where it expects to pay more than US$3 billion in monetary penalties to resolve.
This report by The Canadian Press was first published Sept. 11, 2024.
