The COVID-19 pandemic led Air Canada to a loss of $ 1 billion in the first quarter, with most air travel interrupted.
Air Canada spent $ 880 million in cash in the first three months of 2020, having cut its schedule by 90% since March 16.
“Our first quarter results reflect the severity and brutality of the impact of the COVID-19 pandemic on Air Canada, which began to affect the global airline industry in late January with the suspension by many carriers, including Air Canada, service to China, “Air Canada said in a statement accompanying its results Monday morning. “The impact was exacerbated in March with mandatory social isolation, unprecedented government travel restrictions in Canada and around the world, and the shutdown of economies.”
Air Canada described the steps it is taking to preserve its operations, but said that 2019 revenue and capacity levels would be restored in three years.
“The last quarter was the first in 27 consecutive quarters of no year-over-year growth in operating revenues. Our solid January and February results encouraged us to continue this performance until the sudden and catastrophic impact of the appearance of COVID-19 in Europe and North America in early March. We are now going through the darkest period in the history of commercial aviation, “said Air Canada.
Air Canada said revenues fell $ 712 million to $ 3.7 billion in the first three months of 2020 compared to the same period last year. Operating loss amounted to $ 433 million, compared to profit of $ 127 million in the first quarter of 2019.
The airline’s $ 1 billion net loss, or $ 4 per share, compares to a profit of $ 345 million ($ 1.26) for the same period a year earlier.
Passenger miles dropped 17%.
The World Health Organization declared a global pandemic on March 12 and the Canadian government on March 13 told Canadians to avoid non-essential travel. Ottawa closed the border to international visitors, except for the Americans on March 18, and on March 20 extended the restrictions to include American travelers. Air Canada suspended its US flights on April 26.
Air Canada said its annualized capacity in the second quarter will be reduced by 85 percent or 90 percent, and by 75 percent in the third quarter.
Air Canada said it was taking steps to ensure it had enough cash to survive, including drawing on a $ 1 billion credit facility, an $ 820 million loan secured by aircraft and replacement engines and bridge financing worth $ 780 million.
In addition to the cost savings achieved through capacity and labor reductions, Air Canada said it would save $ 1 billion through further cost reductions and program postponements. Air Canada is getting rid of 79 older, less fuel-efficient aircraft, the Boeing 767, Airbus 319 and Embraer 190, a move that cuts costs and simplifies fleet maintenance. Air Canada and its subsidiaries operate 406 aircraft.
Scotiabank analyst Konark Gupta said Air Canada will consume approximately $ 1.4 billion in cash in the second quarter, increasing to $ 1.5 billion or $ 17 million a day in the ” worst case ”of a total halt.
Gupta said he would be surprised if the Canadian government did not provide financial assistance to Air Canada after the United States government announced that it would.
Air Canada said that until June 6, most of its 33,000 employees will receive federal wage subsidies to help prevent layoffs. The carrier has operated more than 500 international cargo flights since March 22, after removing seats from certain planes to transport cargo. Air Canada has announced plans to operate up to 150 cargo flights per week in the second quarter.
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