Air Canada’s fourth-quarter operating revenue declined more than 80 percent year over year to C$827 million, and the company has lowered capacity plans given “severe restrictions” introduced in Canada in recent weeks.
For the first quarter of 2021, Air Canada projects its capacity will be down 85 percent compared with the first quarter of 2020. That projection is five percentage points higher than what it was planning in mid-January, given new restrictions in recent weeks that require a hotel quarantine upon arrival from international destinations. The restrictions also led Air Canada and rival WestJet to temporarily suspend flights to Mexico and the Caribbean. Air Canada expects its net cash burn will be between C$15 million and C$17 million daily in the first quarter, higher than its rate of C$12 million daily in the fourth quarter, due in part to lower advance ticket sales.
The carrier’s net loss for the fourth quarter was C$1.2 billion, and for the full year, its loss was $4.7 billion, results that president and CEO Calin Rovinescu called “undeniably grim.” However, he said he was optimistic due to new Covid-19 testing capabilities and vaccines, the carrier’s success in raising liquidity—Air Canada ended the year with $8 billion in unrestricted liquidity—and “the constructive nature” of discussions the carrier has had with the Canadian government regarding aid for the aviation industry.
“While there is no assurance at this stage that we will arrive at a definitive agreement on sector support, I am more optimistic on this front for the first time,” according to Rovinescu.
Transat Acquisition Approved
The Canadian government on Thursday also approved Air Canada’s acquisition of Montreal-based airline Transat for C$190 million. The approval came with stipulations, including maintaining Transat’s headquarters and brand in Quebec, the launch of new destinations in the next five years and continuing to provide services in both French and English.
Transat had indicated it might not be able to continue operations on its own amid the pandemic, and Canada Transport Minister Omar Alghabra in a statement said the deal “will bring greater stability to Canada’s air transport market.”
Rovinescu declined to comment further on the acquisition in Friday’s earnings call. WestJet CEO president and CEO Ed Sims on Thursday decried the decision in a statement, saying it would lead to “increased prices, less choice [and] decreases in service.”
“It is hard to imagine a deal as anti-competitive in any industry where then No. 1 player buys No. 3 without meaningful remedies,” Sims said in the statement. “This is a serious setback to Canada’s economy.”