Air Canada's operating revenues declined 80.4 percent year
over year to $729 million Canadian in the first quarter amid stringent travel
restrictions that include a required hotel stay for quarantine upon return from
international travel, a policy that the carrier's executives are urging the
government to ease.
During the quarter, Air Canada continued to operate "a
limited schedule for necessary travel and to ship essential cargo" due to the
restrictions, according to president and CEO Michael Rousseau. Capacity in
the first quarter was down 82 percent year over year. While planned capacity
for the second quarter is about double what Air Canada flew a year prior, in
the early months of the pandemic, it will still be only about 16 percent of
what the carrier flew in the second quarter of 2019.
As Canada grapples with another wave of Covid-19 infections
but could have a large portion of the population vaccinated by summer's end,
Rousseau said the government now needs to "communicate and implement"
its plan for reopening.
"Starting with replacing blanket restrictions with
science-based testing and limited quarantine measures where appropriate, Canada
can reopen and safely ease travel restrictions as vaccination programs roll out,"
according to Rousseau. "We have seen elsewhere, notably in the [United
States], that travel rebounds sharply as Covid-19 recedes and restrictions are
lifted, and we fully expect this can be replicated in Canada."
Similar to the major U.S. carrier forecasts, Air Canada also
projects corporate demand rebound will come after the summer, based on
conversation with its large corporate clients. "We see some [small and
medium enterprise] demand in the current environment, but our assumption is the
corporate demand will return in the September timeframe, post-Labor Day,"
Air Canada EVP and chief commercial officer Lucie Guillemette said.
Air Canada's daily cash burn during the quarter was about
$14 million Canadian. In a research note, Cowen analyst Helane Becker noted
that the carrier would likely not return to profitability before 2023
"based on current trends."
The carrier finalized an aid package with the Canadian
government during the first quarter that provides access to up to $5.9 billion
Canadian in liquidity, which "makes available, if required, the resources
necessary to rebuild and compete in the post-pandemic world," according to
Rousseau.
That package came
with a requirement that Air Canada refund all tickets to passengers with
Covid-19-altered travel plans. While Air Canada has refunded more than $1.2
billion Canadian to passengers with refundable tickets since March 2020, the
take up on refunds with the new policy has been "much slower than anticipated,"
even with the carrier reaching out to passengers and travel agencies to
communicate the new policy, EVP and CFO Amos Kazzaz said.
Air Canada reported a net loss of $1.3 billion Canadian in
the first quarter, compared with a net loss of $1.04 billion in the first
quarter of 2020.
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