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  • Joe Breitfeller

Air Canada Reports First Quarter Net Loss of $1.049 Billion on Revenues of $3.72 Billion

Air Canada reported on Monday a first quarter net loss of $1.049 billion or $4.00 per diluted share, compared to a net income of $345 million or $1.26/share in Q1 2019. Revenues declined $712 million to $3.722 billion year-over-year.

Air Canada Boeing 787-9 Dreamliner - Courtesy Air Canada

Today, Air Canada reported their first quarter financial results with a net loss of $1.049 billion or $4.00 per diluted share on revenues of $3.722 billion. In Q1 2019, the company reported a net income of $345 million or $1.26/share. The first quarter results include a foreign exchange loss of $711 million compared to foreign exchange gain of $263 million in the first quarter of 2019. As of March 31, 2020, the carrier had unrestricted liquidity of $6.523 billion, down from $7.380 billion at the close of the previous quarter. During the quarter, the carrier’s net debt increased $1.329 billion to $4.170 billion, largely attributable to the company’s draw-down of two revolving credit facilities totaling US$800 million, partially offset by debt repayments of $509 million. A weakened Canadian dollar increased the carrier’s foreign currency denominated debt in the first quarter by $692 million compared to the close of the fourth quarter of 2019. The company’s leverage ratio increased from 0.8 on December 31, 2019 to 1.3 on March 31, 2020. In Monday’s announcement, Air Canada’s President and Chief Executive Officer, Calin Rovinescu said in part,

“The past quarter was the first in 27 consecutive quarters that we did not report year-over-year operating revenue growth. Our solid January and February results gave us every encouragement that this performance would continue until the sudden and catastrophic impact of COVID-19’s onset in Europe and North America in early March. We are now living through the darkest period ever in the history of commercial aviation. Over the last decade, we have infused the entrepreneurial spirit, resilience, innovation and discipline into Air Canada’s DNA and these attributes will serve us well as we navigate through this crisis. Due to disciplined long-term capital allocation we ended 2019 with $7.380 in unrestricted liquidity and still have access to significant unencumbered assets to support additional financing. We reacted quickly to the severity and abrupt impact of the COVID-19 pandemic, taking numerous measures, including drawing down credit lines and completing other financing to increase our liquidity, reducing our close-in capacity by more than 90 percent, instituting a significant cost reduction and capital reduction and deferral program and implementing a temporary furlough of the majority of our unionized and management workforce, as well as management wage reductions for continuing employees.”

Air Canada has reduced second quarter capacity by 85-90 percent and third quarter capacity has been reduced by around 75 percent compared to the same quarters last year. In March, the company drew down two revolving credit facilities totaling US$800 million for net proceeds of $1.027 billion and in April, the company concluded a 364-day term loan in the amount of US$600 million for net proceeds of $829 million. Air Canada’s remaining unencumbered asset pool (excluding the value of Aeroplan and Air Canada Vacations) stands at approximately $2.6 billion. In late April, the carrier concluded bridge financing of $788 million for 18 Airbus A220s which may be used for general corporate purposes. The company expects to replace this loan with longer-term financing from the same lender later this year. Through company-wide cost savings and capital expenditure reduction and deferral programs, Air Canada has reduced 2020 planned expenditures by $1.050 billion. Air Canada also suspended share repurchases in early March 2020 and adopted the Canada Emergency Wage Subsidy (CEWS) program which allowed for the return of previously furloughed employees to the company’s payroll from March 15, 2020 through June 6, 2020.

Additionally, the company has retired 79 older Boeing 767s, Airbus A319s and Embraer E190s from their fleet, resulting in fleet simplification, reduced cost structure and a smaller carbon footprint. Air Canada has operated over more than 500 all-cargo flights since March 22, 2020 and plans to operate 150 cargo flights per week during the second quarter using Boeing 787s and 777s, as well as four newly converted 777s and four converted Airbus A330s.

In trading Monday morning, shares in Air Canada (XTSE: AC) were 7.77% lower at CAD $17.80/share (9:49 AM EDT).

Source: Air Canada

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