Air Canada Reduces Second Quarter Capacity by 50 Percent, Continues Liquidity Preservation Measures
Air Canada announced on Monday that they will reduce second quarter capacity by 50 percent versus Q2 2019. The carrier will also continue system-wide cost savings and liquidity measures including workplace reductions and other programs.
Today, Air Canada announced that they will reduce second quarter capacity by 50% versus last year and continue their company-wide cost reduction and capital preservation programs. For April, the company will reduce Pacific market capacity by approximately 75%. As of March 13, 2020, Air Canada had cash, cash equivalents and investments of $7.1 billion and plans to draw-down a $200 million Canadian credit facility next week, bringing their total liquidity to $7.3 billion. The carrier believes that a combination of lower fuel prices and cost savings associated with capacity reductions, workplace reductions and other cost savings programs will mitigate 50-60% of the company’s revenue loss for the second quarter of 2020. Air Canada has also targeted at least $500 million in cost reduction and capital deferral programs in order to preserve cash. In Monday’s announcement, Air Canada’s President and Chief Executive Officer, Calin Rovinescu said in part,
“COVID-19 presents the global airline industry with unprecedented challenges, compounded by uncertainty as to the extent of its effects. However, we are confident that after a decade of transformation and record results, Air Canada today has the agility, the team and the route network to successfully navigate through this crisis. Most importantly for business continuity, it also has the necessary financial resources, including a solid balance sheet, record liquidity levels, higher debt ratings based on a low leverage ratio, and a significant pension plan surplus. These deep strengths enable us to fully focus our immediate attention on both the safety and well-being of our customers and on our employees and on mitigating the financial impact of the virus.”
Air Canada’s unencumbered asset pool (excluding the value of Aeroplan and Air Canada Vacations) is valued at approximately $5 billion and includes 89 unencumbered aircraft, representing 25 percent of capacity. The carrier’s original 2020 capital expenditure program was projected at $2.4 billion, but will be substantially reduced by various cost savings measures, including the possibility of deferring certain aircraft deliveries. The company has no material debt maturities this year and as of January 1, 2020 their pension plans had an aggregate surplus solvency of $2.6 billion. Additionally, Air Canada recently reduced their 2013 order for Boeing 737 MAX aircraft by eleven, which were scheduled for delivery in 2023 and 2014.
Air Canada serves nearly 220 airports on six continents and is Canada’s largest domestic and international airline. The airline serves 62 airports in Canada, 53 in the U.S. and 101 in Europe, the Middle East, Africa, Asia, Australia, the Caribbean, Mexico and Central & South America. Air Canada serves over 51 million customers annually and in 2019 was named ‘Best Airline in North America’ by Skytrax. The carrier is also a member of the Star Alliance, the world’s most comprehensive network, serving over 1,250 airports in 195 countries.
Source: Air Canada
Editor's Note: We stand by the entire Air Canada team and all airlines during this difficult period as the entire world fights to limit the transmission of, and ultimately recover from, the global COVID-19 pandemic. Once it has been defeated, we look forward to the emergence of an even stronger and more robust global commercial airline industry. Further, we congratulate Air Canada on their extraordinary financial management and strong liquidity position.