Air Canada, WestJet testify before Committee on Transport as financial challenges persist; Rouge services suspended indefinitely

Avatar for Ken PoleBy Ken Pole | February 5, 2021

Estimated reading time 7 minutes, 18 seconds.

After nearly a year of accelerating operational constraints due to COVID-19 – complicated by the now resolved technical issues with their Boeing 737 Max fleets – Air Canada and WestJet made a concerted pitch Feb. 4 for federal government help in resolving their mounting financial challenges.

Testifying before the House of Commons committee, which handles transportation issues, were the carriers’ government relations executives.

Air Canada confirmed that because all flights to the Caribbean and Mexico had been suspended Jan. 31 at the government’s request, it is “again pausing our Rouge operations effective Feb. 8, as these flights are primarily operated by Rouge.” Galen Burrows Photo

David Rheault, managing director of Government Affairs and Community Relations at Air Canada, and Andy Gibbons, director of Government Relations and Regulatory Affairs at WestJet, agreed that it will take several years for the industry as a whole to recover from what they called a “catastrophic” and “devastating” situation.

Rheault pointed out that Air Canada, having carried more than 50 million domestic and international passengers last year, now is “burning around $15 million per day,” despite having suspended service on many routes and laying off more than 20,000 (or about half) of its employees. “We have to mitigate our losses and preserve our liquidity,” he said. “This situation cannot carry on. . . . Other countries have acted already and have put in more than $200 billion into their air carriers to try to help.” 

Rheault acknowledged that discussions are ongoing three months after the government said it was preparing a support package, but a non-disclosure agreement prevented him from sharing any details. However, he suggested that easing travel restrictions could be “done safely” if passenger screening trials at a couple of airports could become national policy if the committee recommended it when it reports back to the House.

Gibbons told the committee that WestJet bookings have plunged by as much as 95 percent, including a “staggering” 97 percent in the third quarter of 2020. “At our current booking levels, we would need six-and-a-half years to achieve our 2019 bookings.”

But “this story is not just about bookings and revenue,” he added. A pre-pandemic workforce of more than 14,000 had been reduced to 5,600. “Westjetters have been living in uncertainty, enduring a rollercoaster of layoff-recall-layoff” due to the “fluidity and unpredictability” of various travel restrictions announced by the government. Even so, he said, WestJet had operated more than 30,000 flights with a total of more than 1.4 million passengers and, since September, had a zero-tolerance mask policy.

The effects of that roller-coaster were being felt over at Air Canada even as the committee was meeting. The airline confirmed in an email to Skies that because all flights to the Caribbean and Mexico had been suspended Jan. 31 at the government’s request, it is “again pausing our Rouge operations effective Feb. 8, as these flights are primarily operated by Rouge.”

Originally suspended last year as the pandemic persisted, Rouge services were restarted in November “in anticipation of winter travel” — only to have the roller-coaster dive again and result in a further 80 layoffs following the last Rouge flights on Feb. 8. Given the unpredictability of the pandemic’s own ups-and-downs, the parent company could only say that “Rouge remains part of Air Canada’s overall business strategy.” 

Meanwhile, back at the committee, Gibbons raised the politically-contentious issue of refunds to passengers whose bookings had to be cancelled. He said WestJet is “the only Canadian airline that proactively refunds guests if flights were cancelled by us due to the pandemic, whether the fares purchased were refundable or non-refundable.” In effect since October, Gibbons said the initiative aligns WestJet with “consumer friendly” policies at British, European and U.S. carriers.

He said that when the committee reports back to the House, it should recommend that the government “prioritize domestic travel and negotiate a transparent and clear policy” with provincial governments. “This could be based on COVID levels or a percentage of population vaccinated,” he said. “Canadians should be able to see their country this summer safely.”

Air Canada’s evident preference for vouchers rather than cash refunds was challenged by Bloc Québécois MP Xavier Barsalou-Duval, who pointed out that Air Canada’s third-quarter 2020 statement (the fourth quarter and 2020 annual statement is to be released Feb. 12) showed that it had $9.6 billion in its coffers.

“If WestJet did it, why can’t you?” he asked. Rheault replied that Air Canada had, in fact, refunded $1.2 billion worth of tickets in compliance with a Canadian Transportation Agency directive, which justified vouchers or credits toward future travel when services were cancelled “for reasons outside the carrier’s control.” That said, “if we can get something from the government, we will be able to refund.” 

But Taylor Bachrach, a New Democratic Party MP from B.C., continued to press Rheault on the refund policy, digging deeper into the last financial statement. “The company had $7.7 billion in short-term liquidity, including $3.79 billion of cash on hand,” he said. “Can you explain . . . why a corporation with billions of dollars can’t fairly refund their customers for services that were never provided?”

Rheault reiterated that Air Canada’s policy is “compliant and in line with all the CTA’s statements and orders,” adding that “we need to preserve our liquidity to be in a position to be able to recover from that crisis.” He also said foreign competitors were regaining “a lot of market share,” and Air Canada needed to preserve its liquidity as it prepares to recapture its share of the global market. 

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