• Joe Breitfeller

Air Canada Reports Third Quarter Net Loss of $685 Million on 86 Percent Revenue Decline to $757 M

The carrier’s third quarter EBITDA, excluding special items was reported as ($554) million, while operating income was ($785) million compared to $956 million during Q3 2019. Air Canada closed the third quarter with $8.2 billion in unrestricted liquidity.


Air Canada Boeing 787-9 Dreamliner - Courtesy Air Canada

On Monday (November 9, 2020), Air Canada announced a third quarter net loss of ($685) million or ($2.31) per diluted versus a net income of $636 million or $2.35/share during Q3 2019. The carrier’s year-over-year revenue declined 86 percent to $757 million. Air Canada’s third quarter EBITDA loss was ($554) million compared to a positive 1.5 billion result in the same period last year. The airline’s total revenue passengers declined 88 percent versus the third quarter of 2019. Air Canada closed the third quarter with $8.189 billion in total unrestricted liquidity. In Monday’s announcement, Air Canada’s Chief Executive Officer, Calin Rovinescu, said in part,


“Today's results reflect COVID-19's unprecedented impact on our industry globally and on Air Canada in what has historically been our most productive and profitable quarter. From the outset, we have made the health and safety of our customers and employees our chief concern. Our airline has been a leader in introducing progressive layers of protection, such as our comprehensive suite of biosafety measures, Air Canada CleanCare+, and we continue to explore new technologies and processes to further assure travellers and regulators. Amongst the various science-based measures we have been advocating, testing at airports is by far the most significant, as demonstrated by the McMaster HealthLabs' study of international travellers arriving at Toronto-Pearson. It was reported to be the largest-ever study of its kind and preliminary results clearly confirm safe alternatives exist to a mandatory 14-day quarantine, which is both stifling demand and frustrating travellers who are willing to be tested.

“In parallel, we acted decisively to implement our COVID-19 Mitigation and Recovery Plan. Since March, we have raised almost $6 billion in additional liquidity, leveraging what was one of the industry's strongest balance sheets as we entered the pandemic. We took the painful steps of eliminating 20,000 jobs, after having created 10,000 over the previous five years, and of reversing 10 years of profitable network expansion by reducing capacity by more than 80 per cent in the third quarter.

“At the end of June, we made the difficult decision to indefinitely suspend 30 domestic routes and close eight regional stations and our Network Planning team has identified up to a further 95 domestic, U.S. transborder and international route suspensions and nine Canadian station closures required to preserve liquidity, cut costs and reduce capital expenditures as we prepare for a smaller footprint expected to last several years. Given the public statements made by the Honourable Marc Garneau, Canada's Minister of Transport, on November 8, 2020 regarding commencing immediate discussions with major airlines on aviation industry sector-specific support, we are deferring the additional route suspensions and station closures pending the progress of those discussions...

“…We have taken several measures to carefully rationalize our existing fleet: We are accelerating the retirement of 79 mainline and Rouge aircraft. We are deferring delivery of new Boeing 737-8 and Airbus A220 aircraft scheduled for delivery in 2021 and 2022 and cancelling 10 Boeing 737-8s and 12 Airbus A220s, representing about 40 per cent of the remaining scheduled deliveries. Despite modifications made to our orders, these two aircraft remain the core of our narrowbody fleet and enable us to efficiently serve transcontinental domestic and transborder routes through improved economics and range, while providing an excellent customer experience. Through this fleet restructuring and other capital reduction initiatives, we have successfully lowered total projected capital expenditures by about $3.0 billion over the 2020 to 2023 period compared to our total projected capital expenditures at the end of 2019…”

As previously mentioned, Air Canada closed the quarter with nearly $8.2 billion in unrestricted liquidity. The airline also currently has approximately $1.8 billion in unencumbered assets (excluding the value of Aeroplan, Air Canada Vacations and Air Canada Cargo). For 2020, Air Canada has initiated company-wide cost reductions of around $1.5 billion, versus an initial target of $500 million. Third quarter operating expenses declined 66 percent on an 81.7 capacity reduction, largely attributable to strict cost management on variable and fixed expenses. The company has also reduced their workforce by approximately 20,000 employees, or 50 percent of their workforce, through a combination of layoffs, terminations, voluntary separations, early retirements and special leaves.


Air Canada is also retiring 79 older aircraft from their fleet including Boeing 767s, Airbus A319s and Embraer 190s. In November, the company also amended their purchase agreement for Airbus A220-300s with a deferral of 18 aircraft over 2021 and 2022 and a cancellation of 12 aircraft. During the fourth quarter of 2020, the carrier expects to take delivery of five A220s. Additionally, Air Canada cancelled 10 out of 50 Boeing 737 MAX 8s on order and deferred delivery of the last 16 aircraft to the period from late 2021-2023. The fleet restructuring and other capital reduction initiatives is expected to reduce the company’s CAPEX spending by approximately $3 billion between 2020 to 2023 compared to 2019 projections.


The company’s net debt at September 30, 2020 was $4.973 billion, an increase from $2.132 billion at December 31, 2019. During the third quarter net cash flows in operating activities was $286 million, a decline from $1.120 billion during Q3 2019 on lower operating results, largely attributable to the global COVID-19 pandemic. The carrier’s third quarter net cash burn was $818 million or approximately $9 million/day, an improvement over management’s projection of $1.35-$1.6 billion or $15-17 million daily. For the fourth quarter, Air Canada expects a net cash burn of between $1.1 to $1.3 billion or $12-14 million/daily including $4 million in daily CAPEX and $5 million in daily lease and debt service costs.


Air Canada is Canada’s largest domestic and international airline, serving over 51 million guests in 2019. The Canadian flag carrier is a founding member of the Star Alliance and the only international network carrier in North America to receive a Four-Star ranking from Skytrax, who also named the carrier ‘2019 Best Airline in North America.’


Source: Air Canada

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