In its first quarterly results since receiving a $6 billion bailout package from the federal government, Air Canada Friday morning revealed a net loss of $1.304 billion in the first quarter of 2021, compared to a net loss of just over one billion dollars in the same quarter last year.
Other highlights include:
- 80 per cent decline in operating revenues: $729 million, compared to $2.993 billion in Q1 2020
- Operating loss of $1.049 billion compared to an operating loss of $433 million in the first quarter of 2020.
- Lower than expected net cash burn of $14 million per day on average / $1.274 billion; lower than management's expectations of between $15 to $17 million per day.
- 10 x Negative EBITDA (1) (earnings before interest, taxes, depreciation and amortization), of $763 million compared to EBITDA of $71 million in the same quarter of 2020.
- Unrestricted liquidity amounted to $6.582 billion at March 31, 2021.
- Net cash flows used in operating activities of $888 million deteriorated by $868 million from the same quarter in 2020 on lower operating results.
The lower net cash burn versus what was previously anticipated was attributable to a combination of higher than anticipated operating earnings, favourable timing on working capital, and deferred settlement of aircraft lease returns.
"The persistence of COVID-19 and its resurgence in Canada are weighing heavily on the Canadian airline industry, as reflected in Air Canada's first quarter results,” said Michael Rousseau, President and Chief Executive Officer of Air Canada.
“Still, through the hard work and dedication of our employees, we are operating a limited schedule for necessary travel and to ship essential cargo. I thank our employees for their professionalism and assure them, as well as our investors and all stakeholders, that better times lie ahead for our airline."
Consumer Refunds
Since March 2020, Air Canada reported it has refunded more than $1.2 billion to customers holding refundable tickets.
In April 2021, as part of its relief package deal with Ottawa, Air Canada started offering eligible customers who purchased non-refundable tickets for travel on or after February 1, 2020 but did not fly, the option to obtain a refund to the original form of payment.
The company notes those customer refunds will be neutral to Air Canada's liquidity position and will improve its net working capital with proceeds drawn under the refunds credit facility from the Government of Canada.
“Better Times Ahead”
On March 1, 2021, Air Canada consolidated its regional flying with Jazz Aviation LP (Jazz). As a result, Jazz has become the sole operator of flights under the Air Canada Express banner. Air Canada transferred the operations of its Embraer 175 aircraft to Jazz and expects to realize $400 million in cost reductions over the term of the 15-year amended capacity purchase agreement.
In addition, "We continue to pursue other revenue opportunities. Air Canada Cargo has now completed more than 7,500 all-cargo flights since March of last year. We are building our transformed Aeroplan program, establishing a well-received partnership with Starbucks in Canada,” Rousseau’s statement said.
Double Capacity Next Quarter Compared to Last Year
In the first quarter of 2021, as a result of the continued impact of the COVID-19 pandemic, Air Canada reduced its ASM capacity by 82 per cent compared to the first quarter of 2020 (or a reduction of 84 per cent when compared to the first quarter of 2019).
But the carrier plans to approximately double its second quarter 2021 ASM capacity from the same quarter in 2020. When compared to the same period in 2019, second quarter 2021 ASM capacity is expected to decrease 84 per cent.
Reopening Plan "Essential"
"With these and other measures, Air Canada is poised to emerge strongly from the pandemic,” concluded Rousseau.
“It is now essential that governments communicate and implement a reopening plan for our country; recognizing that a healthy aviation sector is vital to Canada's economic recovery.
“Starting with replacing blanket restrictions with science-based testing and limited quarantine measures where appropriate, Canada can reopen and safely ease travel restrictions as vaccination programs roll out. We have seen elsewhere, notably in the U.S., that travel rebounds sharply as COVID-19 recedes and restrictions are lifted, and we fully expect this can be replicated in Canada.”
