Third Quarter: Air Canada Slows Daily Cash Burn To $9M From $19M In Q2
Anna Kroupina, Open Jaw
Air Canada posted a CA$685 million net loss in the third quarter as it continues to struggle with the massive downturn caused by the COVID-19 pandemic.
Border restrictions around the world and Canada's mandatory two-week quarantine continue to cripple air travel and demand, resulting in an 88% decline in total revenue passengers carried in the quarter compared to last year's third quarter.
"Today's results reflect COVID-19's unprecedented impact on our industry globally and on Air Canada in what has historically been our most productive and profitable quarter," said Calin Rovinescu, President and Chief Executive Officer of Air Canada.
To help it weather the pandemic, Air Canada initiated a company-wide cost reduction program for 2020, which allowed it to reduce its cash burn to $9 million per day, compared with about C$19 million per day in the second quarter. AC says this was due to deferral of capital expenditures, higher cash receipts related to the CEWS program, and additional working capital benefits.
"Since March, we have raised almost $6 billion in additional liquidity, leveraging what was one of the industry's strongest balance sheets as we entered the pandemic. We took the painful steps of eliminating 20,000 jobs, after having created 10,000 over the previous five years, and of reversing 10 years of profitable network expansion by reducing capacity by more than 80% in the third quarter," Rovinescu said.
In JUN, the airline indefinitely suspended 30 domestic routes and closed eight regional stations. Owing to the capacity reduction, Air Canada says it decreased its Q3 2020 operating expenses by $3 billion – or 66% -- from the same quarter in 2019. Air Canada announced in its Q3 financial report it is deferring a further 95 route suspensions and nine Canadian station closures pending the progress of discussions with the government. These closures are on top of thecuts announcedin JUN.
Adding to its cost-cutting measures is a fleet retirement program that will see it offload 79 older aircraft consisting of Boeing 767, Airbus A319 and Embraer 190 aircraft. The move is said to simplify the airline's fleet, reduce its cost structure, and lower its carbon footprint. The airline is also deferring delivery of new Boeing 737-8 and Airbus A220 aircraft, cancelling 10 Boeing 737-8s and 12 Airbus A220s, and accelerating the retirement of 79 mainline and Rouge aircraft.
While governments around the world have already provided more than US$160 billion of aid to airlines, Ottawa has, to date, provided only broad support available to all sectors of the economy. On Sunday, Minister of Transport Marc Garneau confirmed the government will provide loans to the airlines, with discussions beginning this week.
Air Canada tapped into the federal Canada Emergency Wage Subsidy (CEWS) for most of its workforce and says it plans to continue its participation through JUN 2021, when the program is set to end.
As it continues to advocate for a science-based approach to travel restrictions and quarantines, Rovinescu said Air Canada’s discussions with the Government of Canada to safely reopen travel are ongoing.
Looking to the future, Air Canada plans to reduce its Q4 2020 capacity by 75% from the same quarter in 2019. It forecasts a cash burn of $12 million to $14 million per day for the quarter.
Anna Kroupina Journalist
Anna is OJ's newest member and she joins the team as a writer/reporter. She co-writes the daily news and covers events. Although she's new to the industry, pursuing a career path in travel/tourism has been a goal since her first family road trip to the Florida Keys sparked a desire to discover the world and this exhilarating, fast-paced industry.