Air Canada CEO calls for easing of travel rules as company loses $1.75B

Air Canada’s chief executive is calling on the government to ease COVID-19 travel restrictions that he says have created “one of the most severe aviation lockdown regimes in the world,” preventing the airline’s ability to recover amid collapsing demand.

Air Canada reported a loss of $1.75 billion in its latest quarterly earnings on Friday, as the COVID-19 pandemic and related travel restrictions prompted the airline to layoff thousands of employees and slash seat capacity by 92 per cent. Revenues in the three month period ending June 30 were $527 million compared to $4.2 billion during the same time last year, a decline of 89 per cent.

“Today’s results underscore the tremendous urgency for government’s in Canada to take reasonable steps to begin to safely reopen our country and revive aviation, much in the way other countries have been able to,” Air Canada chief executive Calin Rovinescu said in a statement.

On a conference call with analysts on Friday, Rovinescu pointed to “no fewer than four overlapping barriers to travel and economic recovery” imposed by the federal government. Those barriers include restrictions on foreign travellers; mandatory quarantine rules for all travellers arriving in Canada; interprovincial travel barriers and government travel advisories to avoid all non-essential travel, a move that prevents travellers from obtaining travel insurance.

“Together these measures constitute one of the most severe aviation lockdown regimes in the world,” Rovinescu said on the conference call with analysts.

“While needed and appropriate at the outset in March, these constraints still remain in place, unadjusted, despite the availability of more targeted measures that can achieve legitimate public health objectives. And their combined effect has been to decimate the airline business and prevent the possibility of any real recovery at a time of otherwise fragile demand.”

Travel demand has cratered amid the coronavirus pandemic, with Air Canada carrying less than four per cent of the passengers it carried in last year’s second quarter. Passenger revenues fell from $4.3 billion last year to $207 million in 2020, a decline of more than 95 per cent. Air Canada is burning through between $15 million and $17 million in cash per day, an improvement from $19 million per day in the previous quarter.

In other jurisdictions, governments have stepped in and offered financial support to struggling airlines. Rovinescu said Air Canada is the only airline amongst the 20 largest in the world that has not received an industry-specific financial support package.

“Other parts of the world have also had a more rational, I would say, science-based approach to opening markets,” he said.

“But our perspective is that it should be one or both, but it cannot be neither. This is what we continue to be advocating for.”

Rovinescu said the government made the right decisions in the early days of the pandemic when it did things including closing the Canada-U.S. border to non-essential travel.

“But the idea that we have stayed in exactly the same position since March is the part that I find unacceptable because we are now migrating from a health crisis into a fairly severe economic crisis if we don’t start opening the economy in a more meaningful way,” he said.

National Bank analyst Cameron Doerksen wrote in a note to clients Friday that travel restrictions, including the 14-day mandatory quarantine rules and closure of the Canada-U.S. border, are the “biggest impediment” for Air Canada to rebuild its revenues.

“We do believe that Air Canada has the financial strength to weather the storm for an extended period and may emerge from the crisis in a relatively stronger competitive position, but until restrictions begin to ease, we believe that the upside for Air Canada shares will be limited in the near-to-medium-term,” Doerksen wrote.

Air Canada has previously called on the federal government to ease travel rules and restrictions. Earlier this month, the airline sent a letter to Transport Minister Marc Garneau and Health Minister Patty Hajdu urging the government to “consider a science-based approach” to easing travel restrictions.

Air Canada’s chief medical officer Dr. Jim Chung said the government should replace the quarantine restrictions “with more proportionate, evidence-based measures that can achieve public health objectives, while causing less detriment to other public interests and allowing for a measured restart of aviation, similar to what is occurring in other countries.”

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