Air Canada Cancels 12 Airbus A220 And 10 737 MAX Orders

Air Canada lost over half a billion dollars in the last quarter, and despite lowering cash burn to around $7 million a day, it is expecting a tough winter ahead. As part of its efforts to improve its position, it has deferred some new narrowbody aircraft deliveries. More significantly, it has also canceled orders for 10 Boeing 737 MAX and 12 Airbus A220s entirely.

Air Canada A220
Air Canada has cancelled parts of its A220 and 737 MAX orders. Photo: Air Canada

Deferrals and cancellations

Air Canada’s third-quarter results are in and are as gloomy as is to be expected. Overall, the airline reported a net loss of CA$685 million ($526 million) for the quarter. It was an 86% drop from its performance last year, and has led the airline to take some significant steps to improve its liquidity position.

The airline’s President and Chief Executive Officer, Calin Rovinescu, noted that both Air Canada and its subsidiary Rouge will come back from the crisis with much smaller fleets. Overall, 79 aircraft across the two fleets will be taking early retirement. Additionally, orders with both Airbus and Boeing have been canceled or deferred. He said,

“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.”

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Air Canada 737 MAX
Calling it the 737-8, the MAX cancellations make up about 40% of the remaining order. Photo: Getty Images

Rovinescu noted that, despite modifying these orders, the airline sees these aircraft as still being core to its narrowbody fleet. His words suggest a commitment to the types remains, even though the order book has shrunk. He concluded,

“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.”

Fighting for survival

These aircraft deferrals and order cancellations are part of a suite of measures that Air Canada is taking to improve its liquidity position. Since March, the airline says it has secured an additional CA$6 billion ($4.6bn) in additional liquidity through what the CEO calls ‘the painful steps’ of laying off 20,000 jobs and reducing capacity by more than 80% in the quarter.

It has been working to trim costs too, and through the third quarter said it had driven down its cash burn to CA$9 million per day ($7 million), bettering the projected burn rate of CA$15 – 17 million a day ($11.5 – 13 million). However, it warned that, in quarter four, it is still expected to burn through CA$12 – 14 million per day ($9 – 11 million) due to increases in end-of-lease payments and higher expenditure related to unavoidable A220 deliveries.

Air Canada A220
The airline is fighting to keep costs down and liquidity up. Photo: Air Canada

Rovinescu hit out at the mandatory quarantining of passengers arriving in Canada, citing the airline’s own testing trial in partnership with Toronto-Pearson Airport as evidence of viable alternatives. He said,

“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.”

Despite the challenges facing the airline, it remains focused on the future. The results detailed its COVID-19 Mitigation and Recovery Plan, which wraps in elements of customer service and safety along with management of capacity, network, and ongoing financial measures. It says it is proceeding with the proposed acquisition of Transat A.T. Inc and is continuing discussions with the Government of Canada on both travel restrictions and further financial support for the industry.