Air Canada reports drastic decrease in revenues, CEO points to ‘ever-changing’ travel restrictions

AvatarBy Ken Pole | February 12, 2021

Estimated reading time 5 minutes, 57 seconds.

As expected, Air Canada had a difficult 2020 due to the COVID-19 pandemic. But when president and CEO Calin Rovinescu confirmed the numbers Feb. 12, he also fired a broadside at an “ever-changing patchwork” of government travel restrictions and quarantine measures, which he said have created market uncertainty.

Air Canada’s 2020 revenues of C$5.833 billion were down 70 percent from the previous year’s $19.131, as it posted a $4.647 billion net loss compared with a 2019 profit of $1.476 billion; the airline’s passenger volumes in 2020 plunged 73 percent to less than 13.8 million from more than 51.5 million.

In addition to laying off more than 20,000 employees and suspending service to many communities, Air Canada was able to offset some expenses by reducing its operational fleet to 344 aircraft from 403 at the close of 2020. Galen Burrows Photo

“Undeniably grim, results such as these are being reported world over,” Rovinescu acknowledged in his final financial briefing for industry analysts, explaining that he will retire Feb. 15 after nearly 21 years at Air Canada. He will be succeeded by Michael Rousseau, his deputy CEO and chief financial officer for the past 12 years.

“We close the book on the bleakest year in the history of commercial aviation after . . . several years of record results and record growth,” Rovinescu added in a news release. “As we move into 2021, while uncertainty remains as a result of the new variants of the virus and changing travel restrictions, the promise of new testing capabilities and vaccines is encouraging and presents some light at the end of the tunnel.”

In addition to laying off more than 20,000 employees and suspending service to many communities, the flag carrier was able to offset some expenses by reducing its operational fleet to 344 aircraft from 403 at the close of 2020. This included a number of grounded aircraft due to the market impact of COVID-19, as well as 24 Boeing 737 Max planes that remained grounded pending Transport Canada recertification.

Another key element of the fleet reduction was the completed sale and leaseback transactions last October for nine 737 Max 8 aircraft, which were delivered within the past three years. Generating $485 million, it was one of a number of measures the company took to ease its financial pains.

Air Canada also is permanently retiring 79 less efficient, older aircraft, including Boeing 767s, Airbus A319s and Embraer 190s. It also negotiated amendments with Airbus and Boeing on new aircraft orders.

It has deferred delivery of 18 A220-300s this year and next, and will not be buying the final dozen A220s in an original order of 45. Ten of 50 scheduled 737 Max 8 deliveries have been cancelled and 16 have been deferred from late 2021 through 2023.

The fleet restructuring and other capital spending reductions means that Air Canada has reduced planned capital outlay by some $3 billion through 2023.

Overall fleet downsizing enabled it to reduce its available seat miles by 66.6 percent to 37.7 million from 112.8 million, and is already working on further cuts through the first quarter of 2021. Rovinescu said it would “continue to dynamically adjust capacity and take other measures as required to adjust for demand, including as a result of health warnings, travel restrictions, quarantines, border closures and market and regulatory conditions.”

He pointed out that even as the government continued to roll out sundry COVID-19 control measures, Air Canada took the initiative with its own “tenacious” mitigation measures. Those included requiring employees and passengers to wear face coverings; enhanced personal protective equipment for airport agents and crews; working with the government on passenger screening; and implementing “touch-free” baggage check-in, digital-only reading material, and online catering.

Air Canada also is collaborating with medical experts on promoting biosafety and developing science-based evidence in its ongoing COVID-19 response, as well as partnering with the Greater Toronto Airports Authority and McMaster HealthLabs in a study of international arrivals.

“Preliminary results have indicated that testing can provide an effective, responsible alternative to facilitate the safe relaxation of quarantines,” the airline said. “Final results are currently being analyzed and are expected to be published . . . during the first quarter of 2021.” 

Air Canada also is the first Canadian operator to offer a new boarding option that uses facial biometrics, further reducing potential COVID-19 spread. Now available for passengers flying out of San Francisco, it will be expanded to other U.S. airports “in the near future,” and options for Canadian airports are being explored.

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