Air Canada posts $1.7-billion quarterly loss as revenues plunge 89 per cent - The Globe and Mail

An Air Canada plane sits parked at the gate at San Francisco International Airport on June 30, 2020 in San Francisco, California.

Justin Sullivan/Getty Images

Air Canada lost $1.7-billion in the second quarter, as the pandemic and related travel bans forced Canada’s largest airline to ground planes, lay off thousands and slash passenger capacity by 92 per cent.

Revenue fell by 89 per cent to $527-million in the three months ending June 30, from $4.7-billion in the year-ago period, Air Canada said on Friday morning.

Lucie Guillemette, Air Canada’s chief commercial officer, said the airline is monitoring global travel restrictions and is slowly adding routes. The airline will fly to 91 destinations this summer, twice May’s number but half of that a year ago, Ms. Guillemette said on a conference call with analysts on Friday morning. “For the first time ever, our cargo revenue exceeded passenger revenue in the quarter,” Ms. Guillemette said.

Story continues below advertisement

The carrier said it will burn through $15-million to $17-million in cash every day in the third quarter, eroding its liquidity that totaled $9-billion on June 30. Seat capacity will be reduced by 80 per cent, compared with the same period in 2019. Air Canada has raised $5.5-billion amid the pandemic, which has brought the global airline industry to the brink of failure.

Air Canada lost $1.7-billion, or $6.44 a share, compared with a profit of $343-million ($1.26) in the second quarter of 2019.

“As with many other major airlines worldwide, Air Canada’s second quarter results confirm the devastating and unprecedented effects of the COVID-19 pandemic and government-imposed travel and border restrictions and quarantine requirements,” said Calin Rovinescu, chief executive officer of Air Canada. “Canada’s federal and inter-provincial restrictions have been among the most severe in the world, effectively shutting down most commercial aviation in our country, which, together with otherwise fragile demand, resulted in Air Canada carrying less than four per cent of the passengers carried during last year’s second quarter.”

Air Canada said it increased its cost-cutting target by $500-million to $1.3-billion, by retiring 79 planes, closing regional airport operations and reducing its workforce by 20,000 people – more than half its staff – through layoffs, retirement and leaves. The company has tapped the federal government’s 75-per-cent wage subsidy for idled workers, and will use it through December, 2020.

Mr. Rovinescu told analysts the airline will make more cuts as needed, including route deletions and suspensions, and the possible cancellation of orders for Boeing and Airbus planes.

“With operations virtually shut to a stand-still, the focus for [the second quarter] was on minimizing the cash burn and preserving cash,” said Walter Spracklin, a stock analyst at Royal Bank of Canada.

The cuts have reduced the airline’s cash burn to a range of $1.3-billion to $1.6-billion in the third quarter from $1.7-billion in the second quarter, or $19-million a day. “The projected net cash burn for the third quarter of 2020 assumes that certain international borders will be reopened, that travel restrictions in a number of markets will be lifted and that passenger demand will continue to improve,” Air Canada said.

Story continues below advertisement

Mr. Spracklin said Air Canada is using up more cash than he expected, and this will continue unless the airline’s calls for governments to lift travel restrictions are heeded. “The company continues to beseech the government to reopen air travel and it is our sense from the outlook that this reopening from a Canadian perspective is not occurring to the extent expected by management,” Mr. Spracklin said in a note to clients on Friday.

Air Canada, WestJet Airlines and Air Transat have added a small number of summer flights to their reduced schedules, but it is not clear people want to travel. The pandemic has caused mass unemployment in much of the world, and it is not known when a vaccine or treatment for the virus will be found.

The federal government says Canadians should avoid non-essential travel to avoid catching or spreading COVID-19, a serious health threat. Canada has closed its borders to most foreign travellers and requires anyone entering Canada to quarantine for 14 days, with a few exceptions. Some provinces have also imposed restrictions on visitors.

The International Air Transport Association, an industry lobby group, this week said failures by the United States and emerging economies to control their outbreaks, coupled with travel bans, will delay the recovery in demand for air travel to pre-pandemic levels until 2024.

Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.

Let's block ads! (Why?)

https://news.google.com/__i/rss/rd/articles/CBMidGh0dHBzOi8vd3d3LnRoZWdsb2JlYW5kbWFpbC5jb20vYnVzaW5lc3MvYXJ0aWNsZS1haXItY2FuYWRhLXBvc3RzLTE3LWJpbGxpb24tcXVhcnRlcmx5LWxvc3MtYXMtY292aWQtMTktdHJhdmVsLWJhbnMv0gF4aHR0cHM6Ly93d3cudGhlZ2xvYmVhbmRtYWlsLmNvbS9hbXAvYnVzaW5lc3MvYXJ0aWNsZS1haXItY2FuYWRhLXBvc3RzLTE3LWJpbGxpb24tcXVhcnRlcmx5LWxvc3MtYXMtY292aWQtMTktdHJhdmVsLWJhbnMv?oc=5

2020-07-31 11:01:00Z
52780966510627