Air Canada has announced its financial results for the second quarter of 2020 in a recent statement. The airline said on Friday that it had lost C$1.555bn (US$1.16bn) during this period.
Air Canada makes significant losses
The recent pandemic has been kind to very few airlines, and its impact is becoming apparent with current financial reporting. Earlier this week, Air Canada shared the news that it had lost over C$1.5bn (US$1.12bn) in operating losses compared to the same period in 2019. Last year, in the second quarter, Air Canada recorded an income of C$565m (US$422m).
In a string of unfortunate financial reporting, the airline also shared that it had experienced a C$4.21bn (US$3.14bn) decline in revenue for April, May, and June. In 2019, it generated C$4.738bn (US$3.53bn) in revenue for the second quarter, whereas this year, it managed just C$527m (US$393m). These figures represent an 89% decline in revenue.
Despite its shortcomings in this regard, however, Air Canada has been able to claw back revenue in another segment of its operations. The airline saw a 52% increase in cargo revenue thanks to the amplification of these routes during the pandemic. It brought in $269m (US$200m) from these journeys alone.
Air Canada plans for a future strategy
While the losses for Air Canada are unprecedented, they were also inescapable. The airline has since taken matters into its own hands to reduce its costs where possible to maintain sufficient liquidity for the future.
The foundation of its new strategy is to emerge as a smaller and more cost-efficient carrier. To achieve this, it has made cuts to its fleet, people, and overall spending. Earlier on in the year, Air Canada has set a target to reduce its spending by C$500m (US$372m). However, its ambition has proven that it is capable of much more. As a result, the airline has been able to retain C$1.3bn (US$970m) in funds it would have otherwise spent.
To accomplish this, a significant portion of its workforce was released. With around 36,000 employees before the pandemic, Air Canada has now reduced that by half. Approximately 20,000 employees had their contracts terminated through layoffs, voluntary resignation, and early retirements. Air Canada also removed 79 aircraft from its fleet to add to its savings.
In addition to what it’s been able to save, the airline has also been able to procure C$5.5bn (US$4.10bn) in new equity, debt, and aircraft financings in the capital markets since March.
Air Canada ready for action
While Air Canada has done all it can to prepare itself for travel demand resuming, there is a hindrance in its way. Canada is still implementing strict border controls preventing many foreign nationals from entering. Without changes to this policy, Air Canada will not be able to capitalize on the current market.
In a recent press release, the airline said that its figures reflect the need for Canada to promote safe tourism. It said,
“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.”
Until that changes, Air Canada is likely to continue experiencing pressure on its financials, hoping for a chance to rectify its losses.
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