Air Canada today reported unrestricted liquidity of $9.120 billionat June 30, 2020, in line with Air Canada’s expectations, compared to unrestricted liquidity of $7.380 billion at December 31, 2019. Total revenues fell from $4.738 billion in the second quarter of 2019 to $527 million in the second quarter this year, a decline of $4.211 billion or 89 per cent. Cargo revenue increased 52 per cent to $269 million.
The airline reported second quarter 2020 negative EBITDA (excluding special items) or (earnings before interest, taxes, depreciation and amortization) of $832 million compared to second quarter 2019 EBITDA of $916 million. Air Canada reported an operating loss of $1.555 billion in the second quarter of 2020 compared to operating income of $422 million in the second quarter of 2019.
Air Canada Cost Reduction and Capital Reduction and Deferral Program
- Air Canada initiated a company-wide cost reduction and capital reduction and deferral program as a result of COVID-19, which has now reached approximately $1.3 billion, increased from an initial target of $500 million. Excluding depreciation, amortization, and special items, second quarter 2020 operating expenses decreased $2.462 billion or 64 per cent from the same quarter in 2019. Air Canada continues to seek additional opportunities for cash preservation.
- Air Canada announced a workforce reduction of approximately 20,000 employees, representing more than 50 per cent of its workforce. This was achieved through layoffs, terminations of employment, voluntary separations, early retirements, and special leaves.
- Air Canada adopted the Canada Emergency Wage Subsidy (CEWS) for most of its workforce effective March 15, 2020. On July 17, 2020, the Government of Canada announced that the program would be redesigned and extended to December 2020. Air Canada intends to continue its participation in the CEWS program, subject to meeting the eligibility requirements.
- Air Canada is retiring 79 older aircraft from its fleet – consisting of Boeing 767, Airbus A319 and Embraer 190 aircraft. Their retirement will simplify the airline’s overall fleet, reduce its cost structure, and lower its carbon footprint.
“As with many other major airlines worldwide, Air Canada’s second quarter results confirm the devastating and unprecedented effects of the COVID-19 pandemic and government-imposed travel and border restrictions and quarantine requirements. Canada’s federal and inter-provincial restrictions have been among the most severe in the world, effectively shutting down most commercial aviation in our country, which, together with otherwise fragile demand, resulted in Air Canada carrying less than four per cent of the passengers carried during last year’s second quarter. In the face of such an impossible operating environment, I am extremely proud of the outstanding efforts our team is making, doing everything possible to successfully navigate this crisis, leveraging our strong balance sheet and the many other assets we developed or acquired over the last decade,” said Calin Rovinescu, President and Chief Executive Officer of Air Canada.
“Since mid-March, we have raised $5.5 billion in new equity, debt and aircraft financings in the capital markets, providing us with over $9 billion in liquidity as of June 30th to help weather the COVID-19 crisis. In addition, we have taken decisive action to cut spending and preserve liquidity – including a major management and front-line workforce reduction, a $1.3 billion reduction of our fixed costs and capital investments, the permanent retirement of 79 aircraft (representing more than 30 per cent of our combined mainline and Air Canada Rouge fleet), the indefinite suspension of certain domestic routes and station closures, and a reduction in our network seat capacity of 92 per cent in the quarter. These were some of the painful but necessary steps we have taken to stabilize our airline and preserve cash in these uncertain times. We will now look to the future using this unprecedented challenge as an equally unprecedented opportunity to rebuild a smaller but even more nimble airline, with a simplified and younger fleet and a lower cost structure coming out of the crisis.
“Above all, today’s reported declines in revenue of nearly 90 per cent and in passengers of over 96 per cent, should reinforce the tremendous urgency for governments in Canada to take reasonable steps to safely reopen our country and restore economic activity. Other jurisdictions globally are showing it is possible to safely and responsibly manage the complementary priorities of public health, economic recovery and job preservation and creation. This is why Air Canada recently added its voice to that of many business and union leaders, including more than 140 major Canadian corporations and travel and tourism companies, employing nearly three million Canadians, in calling on the Government of Canada to take prudent steps to replace current blanket travel restrictions and quarantines with targeted evidence-based measures that reflect current circumstances.
“For our part, Air Canada is laser-focused on business continuity and in positioning ourselves to emerge competitively as the pandemic recedes. To promote customer safety and confidence, we introduced Air Canada CleanCare+, a comprehensive, multi-layered approach to biosafety at all phases of the journey. As well, we have slowly begun to rebuild our network, recalling a small number of employees and selectively restoring the award-winning services that have placed Air Canada among the world’s great airlines. For this I thank our employees for all of their incredible efforts and dedication and together we look forward to greeting our returning customers,” said Mr. Rovinescu.