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Air Canada's COVID-19 actions

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Air Canada Provides Update on Response to COVID-19 

 

  • Withdraws 2020 and 2021 guidance 
  • Current liquidity level of $7.3 billion
  • Capacity reduction of 50 percent in the second quarter versus the prior year's quarter

MONTREAL, March 16, 2020 /CNW Telbec/ - Air Canada, along with the rest of the global airline industry, is facing a severe drop in traffic and a corresponding decline in revenue as a result of the coronavirus (COVID-19) outbreak and travel restrictions imposed in many countries around the world, including Canada and the United States. Although the company expects this disruption to be temporary, as the full impact and duration of the outbreak is unknown, Air Canada is withdrawing its previously announced first quarter and full year 2020 guidance as well as its full year 2021 guidance (including its free cash flow guidance for the 2019-2021 period) while it takes steps to mitigate the financial impact on its business.

"COVID-19 presents the global airline industry with unprecedented challenges, compounded by uncertainty as to the extent of its effects. However, we are confident that after a decade of transformation and record results, Air Canada today has the agility, the team and the route network to successfully navigate through this crisis. Most importantly for business continuity, it also has the necessary financial resources, including a solid balance sheet, record liquidity levels, higher debt ratings based on a low leverage ratio, and a significant pension plan surplus.  These deep strengths enable us to fully focus our immediate attention on both the safety and well-being of our customers and our employees and on mitigating the financial impact of the virus," said Calin Rovinescu, President and Chief Executive Officer of Air Canada. 

"The crisis facing our industry is worsening as countries around the world adopt increasingly severe measures, national lockdowns and travel restrictions. We understand that the governments of the United States and many European countries such as Germany, France, Italy, Norway and others have approved or are considering assistance for their airline industries in one form or another. Under these circumstances, we believe that the Canadian airline industry should also see similar assistance, whether through forbearance of taxes, landing fees and other charges that form part of the aviation burden in Canada or otherwise until the industry stabilizes.  Our industry associations have been and will continue to make these representations to governments. However, we are not awaiting any decision on these measures before implementing our mitigation plan as we believe decisive action is the best course to follow.

"At Air Canada, our core value is Safety First, Always - for our employees and for our customers. We rigorously follow the guidance of all relevant health authorities and follow best demonstrated practices in the prevention and handling of communicable diseases in the air travel industry. Additionally, in the last year, we entered a partnership with an independent company that monitors infectious diseases and epidemics globally and provides us with information in real-time to ensure we are equipped to make the best decisions, on a timely basis," concluded Mr. Rovinescu.

 

 

Edited by dagger

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And Unifor has ratified a new collective agreement. In 2009, I believe, they rejected AC's contract offer just before the economy tanked, and ended up settling eventually for less. Lesson learned.

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The Fed should also be taking strict action with Nav Canada and the Airport Authorities as I suspect they will follow the same MO as in the past and demand payment or even require pre-payment.

 

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2 hours ago, rudder said:

Ok Dagger.

Where do you think AC will go with the TRZ transaction?

No idea, frankly, but it may be wrapped into a bailout of the industry - AC takes it on, gets some credit for it.

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4 hours ago, rudder said:

 

Where do you think AC will go with the TRZ transaction?

I don't have the link, but there was an article in Friday's National Post about Air Transat.  According to it, Transat's management was confident that the current situation would not affect the transaction.  They had also, supposedly, been promised support by the Quebec government.

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.

Transat CEO says Quebec prepared to help airline weather coronavirus crisis
The government 'would have to' help airline industry, Jean-Marc Eustache says, referencing taxes incurred by airlines

March 12, 2020 - Financial Post
by Vanmala Subramaniam

The chief executive of Transat AT Inc. says the Quebec government been in touch with his company offering “help” in the face of the coronavirus crisis, which has hit the travel industry hard.

“(François) Legault said he is going to help everybody. They are already doing it. They are phoning us even before we told them,” Transat’s Jean-Marc Eustache told analysts on an earnings call Thursday afternoon. “I’m pretty sure they will be there to help because this is a very, very special situation.”

Transat, which was founded by Eustache and Legault 30 years ago, has seen its stock price plummet 45 per cent over the last month.

Airlines have been particularly hard hit by the virus as governments impose restrictive travel measures, and flight cancellations pile up ahead of the critical March break travel period. On Wednesday, U.S. President Donald Trump abruptly imposed a widespread ban on travel between the U.S. and Europe, a move that applied to 26 European countries, but excluded the United Kingdom.

“Ottawa has been in touch, everyone has been in touch,” Eustache added, though he did not provide specifics on what kind of assistance might be coming.

Transat acknowledged in its first quarter earnings statement that daily bookings had already been severely impacted by the virus, and that it would be “impossible to predict” the effect of COVID-19 on future bookings.

That sent its shares cascading downwards, plunging 20 per cent to below the $10 mark in the first hour of Thursday trading, before closing near $11.

Eustache emphasized the company would not provide an outlook for the second quarter or for the summer period, because of the level of uncertainty ahead.

“I have been in this industry for 42 years. The only thing I can say is we will do what we have to do to survive. If we have to ground half the fleet — it is not something we want to do — we will do it. If we have to lay off people, we don’t want to do it, but we will do it,” he said on the call.

He added that the government “would have to” help the airline industry, referencing taxes incurred by airlines. “They will have to do their part too. We will all do it together, step by step.”

Transat’s rapidly plummeting stock price could potentially throw a wrench in a $720 million takeover bid by Air Canada, which was formalized last August but will only close pending reviews by the Competition Bureau, Transport Canada and EU authorities.

Air Canada agreed to purchase Transat for $18 per share. A previous bid, which was rejected by major Transat shareholders, valued the company at $13 per share.

Transat shareholders, including its biggest — Letko, Brosseau & Associates — voted overwhelmingly in favour of the all-cash deal after Air Canada sweetened its bid to $18 per share. Eustache’s own stake in the company is just over one per cent.

On the call, the co-founder and CEO dismissed concerns raised by analysts that the deal was on shaky ground given Transat’s stock price, reiterating that it would go through, subject to government approval.

“The price of the share doesn’t have anything to do with the deal. The conditions of the market doesn’t have anything to do with the deal. The virus is outside of the deal. Nothing material is happening right now that can change the price of the deal,” Eustache stated, in response to a question on the terms of the transaction.

The Competition Bureau is expected to release its report on the transaction on March 23. Eustache cautioned analysts that the report would be negative, given the narrow scope of what the bureau evaluates.

“The report will be tough for the transaction because it is about competition. We know it … there is nothing special with that,” he said, adding that transport minister Marc Garneau’s final decision on the deal is the only thing that matters.

Air Canada and Transat have not discussed the deal since the outbreak of coronavirus, Eustache said, because they aren’t allowed to communicate until the Competition Bureau’s decision is made.

Air Canada’s shares declined by almost 10 per cent on Thursday, extending the coronavirus-related drop to almost 50 per cent in the last month. The stock closed at $24.90.

In a recent note, National Bank transportation analyst Cameron Doerkson forecast that Air Canada would suffer a severe drop in 2020 EBITDA, from $3.6 billion to just $2.2 billion as a result of a reduction in travel demand.

But, he added, the company had a strong balance sheet and would have “more than sufficient liquidity” to fund the $720 million transaction. Air Canada’s break fee, according to the terms of the deal, would be $40 million.

The airline did not respond to the Post’s request for comment on the status of the deal.

Transat’s net loss for the first fiscal quarter of 2020 was $20.3 million, above forecasts, while its revenue was $692.8 million.

The company’s chief operating officer Annick Guerard said that although the company has seen many cancellations, they have also seen data over the last few days that shows an uptick in the number of last minute bookings largely by younger people.

“The younger segment is talking about getting the best deal ever and going on vacation,” she said.

.

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That article is horribly outdated even though the quotes are only 4 days old.

Bragging about selling tickets when now travel outside of Canada is effectively embargoed?

Sunwing is basically shutting down. 100% of pilots and FA’s being laid off. That is the exact state of the packaged vacation business.

TRZ senior management seem to think that some government is going to float them through this crisis. 

And pretending that current circumstances - COVID 19 - market meltdown - are not germane to the transaction?

One need only look back in history at the result of Canadi>n overpaying for Wardair going in to a recession. 

I cannot imagine that AC intend on making the same mistake or do so at a time when cash preservation has been identified as a critical priority. And I am curious what taxpayer funded inducement will have to be offered in order to have AC move forward with the deal as written.

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I think it seems that Eustache has just been sitting back, doing little, and counting his chickens before they hatched...

Bookings and earnings down? not my problem.

Approving raises in a softening market/economy while losing money? not my problem.

Writing guarantee no lay off LOUs? not my problem.

He also doesn't seem to want to be decisive and steer the boat too much in the face of this rapidly changing situation, but if he doesn't he'll topple it altogether.

As was said, cash preservation has to be the top of every airlines' goals right now, and if he can't be a custodian of his own situation until the deal closes, that seems negligent and poor faith.

I can't see AC following through on a deal where the company has been allowed to fail in the months since it was written, nevermind the fact that AC will be parking a sizeable portion of their own fleet and possibly laying off a large number of staff, I imagine they may find that they could use $700 million to keep their own house in order in the months ahead.

 

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If ever there was a time for an airline to invoke force majeure it's now. Transat may be one of the first casualties of COVID-19. 

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16 hours ago, j.k. said:

I think it seems that Eustache has just been sitting back, doing little, and counting his chickens before they hatched...

Bookings and earnings down? not my problem.

Approving raises in a softening market/economy while losing money? not my problem.

Writing guarantee no lay off LOUs? not my problem.

He also doesn't seem to want to be decisive and steer the boat too much in the face of this rapidly changing situation, but if he doesn't he'll topple it altogether.

As was said, cash preservation has to be the top of every airlines' goals right now, and if he can't be a custodian of his own situation until the deal closes, that seems negligent and poor faith.

I can't see AC following through on a deal where the company has been allowed to fail in the months since it was written, nevermind the fact that AC will be parking a sizeable portion of their own fleet and possibly laying off a large number of staff, I imagine they may find that they could use $700 million to keep their own house in order in the months ahead.

 

Imagine if CR goes to the AC unions asking for concessions but insists the TRZ deal is still going to be consummated no matter what (costing $720MM at a time when “cash is critical”). AC employees do not want this merger.

Good luck with that.

Dagger is probably right - the Feds will effectively pay for the merger through stimulus directed at the industry. But AC will need a special carve out worth $720MM (or more). Exactly how much debt is on the TRZ balance sheet? And where are TRZ cash reserves headed over the next 90-120 days?

 

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Hong Kong government extends new travel restrictions to aircrew but exemptions still apply

  • Flight attendants concerned over infection risk on aircraft with crew allowed to work even when they should be in isolation
  • Department of Health extends mandatory quarantine or medical surveillance coming into force on Thursday to aircrew, though opt-outs are available
Lilian Cheng
 

Published: 12:00pm, 18 Mar, 2020

 

Mandatory quarantine has been extended to aircrew by the Department of Health but there are legitimate ways to opt out. Photo: Winson Wong

 

Hong Kong will extend its new travel restrictions to aircrew, the Department of Health says, meaning pilots and flight attendants will have to undergo 14 days of quarantine on arrival from abroad but can fly out earlier as long as their airlines follow set procedures.

However, a flight attendants’ union and crew members warned the coronavirus arrangements risked endangering the safety of passengers and staff as infected personnel would be able to work when they should be isolated.

On-board protections against Covid-19’s spread were also not enough, some members said.

 

The new procedures for flight crew came to light after the city announced the introduction from Thursday of a red travel alert covering all countries, which imposes quarantine or medical surveillance on all arrivals into Hong Kong, and as a third Cathay Pacific crew member tested positive for the virus.

Crew members have been exempted from quarantine since the city first enforced the mandatory measures on arrivals from mainland China, before extending it to other countries in Asia and more recently in Europe.

Given the latest developments, the spokesman from the Department of Health on Tuesday night confirmed there was a change of policy “taking into consideration public health assessment and normal operation of international traffic

Air crew who had travelled to affected areas two weeks before arrival in Hong Kong – irrespective of whether they are city residents – would have to undergo the 14-day quarantine.

But the Department of Health allowed exemptions under certain conditions including if the crew members could self-isolate at accommodation designated by their employers, likely to be their own home or a hotel, and would be subject themselves to medical surveillance over that period.

The airline should also arrange private transport for the crew to travel to and from the airport.
 

“They are allowed to operate another trip but are required to inform the Port Health Division before the trip and they are required to wear a surgical mask during work,” said the spokesman.

 

The procedures also state aircrew must pay attention to their health, and take their body temperature twice daily. If they feel unwell, they must call a department hotline.

According to an internal Cathay Pacific memo for Hong Kong base crew, they are required to self-isolate at home for 14 days, but are permitted to work during the self-isolation period, while the company will provide separate transport to the employee’s home. For overseas crew, they have to stay in the Headland hotel next to Cathay City.

Catherine Hui, a flight attendant of Cathay Pacific, said she was surprised by the new policy exemptions because it amounted to “putting crew members and passengers at health risk”.

“It means while we are under isolation, we still have to go to work if the company calls us,” the 27-year-old crew member said.

“Flights these days from Europe and the United States were so full that we might be virus-carriers, and we might spread the virus to the next flight as some of the infected cases might not have symptoms in the first few days.”

She added some crew members had already refused to work, and requested sick leave.

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https://www.newswire.ca/news-releases/governments-must-protect-aviation-workers-as-sunwing-suspends-operations-878414795.html

Air Canada Provides Update on Ongoing COVID-19 Response


NEWS PROVIDED BY

Air Canada 

Mar 18, 2020, 17:45 ET


Airline further reducing schedule, maintaining essential services where possible

MONTREAL, March 18, 2020 /CNW Telbec/ - Air Canada said today that it will gradually suspend the majority of its international and U.S. transborder flights by March 31, 2020 in response to decisions by national governments, including Canada and the United States, to close borders and restrict commercial aviation as a result of the COVID-19 crisis. Subject to further government restrictions, the airline intends to continue to serve a small number of international and U.S. trans-border destinations from select Canadian cities after April 1, 2020. The airline also intends to continue serving all provinces and territories of Canada after that date, albeit with a significantly reduced network.

All schedule changes can be found at www.aircanada.com

International and U.S. transborder services

In order to facilitate the continued repatriation of citizens to their home countries, including Canadians back to Canada, and to support the essential movement of needed goods and cargo during the crisis, Air Canada intends to continue to operate a limited number of international "air bridges" between one or more of its Canadian hubs and the cities of London, Paris, Frankfurt, Delhi, Tokyo and Hong Kong from April 1 until at least April 30. This will reduce its international network from 101 airports to six.

As to U.S. transborder services, given the decision by the U.S. and Canadian governments today, from April 1, Air Canada will reduce its transborder network from 53 airports to 13, subject to further reductions based on demand or government edicts. The cities with continued service will be: New York (LGA and EWR), Boston, Washington, D.C. (IAD and DCA), Chicago, Houston, Seattle, San Francisco, Los Angeles, Denver, Orlando and Fort Lauderdale.

Domestic Canada network

Air Canada intends to continue to serve all provinces and territories of Canada, reducing its domestic network from 62 airports to 40 through a reduced network during the period April 1 to 30, subject to further reductions based on demand or government edict.

For information on Air Canada's schedule beginning April 1, 2020 please see www.aircanada.com.

"The restrictions on travel imposed by governments worldwide, while understandable, are nonetheless having a cataclysmic effect upon the global airline industry. Our immediate focus is on ensuring the safety and well-being of our employees, customers and communities. At the same time, we are exploring with the Government of Canada possibilities to maintain essential operations to enable as many Canadians as possible to return to Canada, and to support other vital transport needs, including the shipment of goods and cargo during the crisis as required in any state of emergency. We are working around the clock to deal with the impact for our customers and our business of the various travel restrictions that are being made by governments at unprecedented speed without advance warning. We will also look at helping Canadians to return home by operating a limited number of charters from international destinations and exploring with the Government of Canada avenues in this regard. We will provide updates as details are finalized," said Calin Rovinescu, President and Chief Executive of Air Canada.

For Affected Customers

The airline will gradually suspend some of its scheduled flights between now and March 31 as demand for Canadians to return to Canada from a number of destinations reduces. Please check Air Canada's website for details given the rapidly evolving situation.

Affected customers, including those with Air Canada Vacations packages, whose flights are cancelled will receive a full credit valid for 24 months. There is no requirement to contact Air Canada as customers will be contacted directly.

The airline has also put in place temporary, one-way fares to Canada to enable customers abroad to return home. Customers seeking to contact Air Canada are advised that contact centre wait times are elevated, so the airline has put in place a number of self-service tools to enable customers to manage their travel online. For more information please consult our COVID-19 webpage at www.aircanada.com.

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8 hours ago, rudder said:

Imagine if CR goes to the AC unions asking for concessions but insists the TRZ deal is still going to be consummated no matter what (costing $720MM at a time when “cash is critical”). AC employees do not want this merger.

Good luck with that.

Dagger is probably right - the Feds will effectively pay for the merger through stimulus directed at the industry. But AC will need a special carve out worth $720MM (or more). Exactly how much debt is on the TRZ balance sheet? And where are TRZ cash reserves headed over the next 90-120 days?

 

I agree.

And it would have to be "or more" to make it work, because if they do go ahead, even if financed by the Feds, then what? They have half their fleet parked, they are returning leases, delaying and cancelling deliveries, they have their own layoffs likely... the travel market is decimated, and now you have a whole other airline and labour force to start back up and somehow integrate?

Maybe this worked in a market where both airlines are up and running more it less fair to well or better. But where one is to be shut down entirely and another is just trying to hang on?

 

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I'd be intrigued to know what Air Canada could get for Transat tourism assets. Frankly, it just needs the best aircraft and the people to operate them. Anything else.

I'd give Calin a chance to strategize here - he's never met a crisis he couldn't work to advantage. That's why he's particularly well suited for this environment. Of course, I suspect he can get everyone to participate in whatever scheme he concocts. No one will like it, but there is a very good chance that if everyone plays along, AC will not only survive this, but as other airlines exit the scene permanently, AC could be a major winner.

I'd love to be listening in on his calls to Ottawa and Quebec City. 

 

 

Edited by dagger
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I think that Air Canada could safely dump the 737-max aircraft back to Boeing.  Even the ones that had been in service.

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Yeah, I am sure that Calin can line up at the Boeing Customer service desk, with his Boeing Club card, and a trolly filled with 50 737s  and tell them he's not happy and wants his money back.

Edited by anonymous

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After reading this thread my thoughts went back 20 years to a recorded telephone message, from Robert Milton, to all employees explaining the Canadian Merger.  His explanation to employees was the Feds have made it clear we have no choice.  Routes threatened etc.  

That would have been Jan 2000.

Next came 911. Then SARS.  Then Bankruptcy. Although I didn’t post at the time I remember being glued to posters like Don Hudson and Daggar.  I was just new with AC  and the stress was high.

Two messages.  
 

1) To those who are vulnerable right now.  This will pass.  AC pilots will do what it takes to keep furlough to a minimum in the mean time. Only listen now to people who you know have a good idea of what they are talking about.  Forget the masses. 

 

2) Dagger you must be old.    😂. Actually about 20 years late but thank you.

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AC informed CUPE of layoffs today.  

All Rouge FAs and almost 50% of mainline have been declared surplus.  Details of mitigation programs are to follow.

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Like to see the FM clause in the CUPE contract which guarantees no layoffs for the term of the contract. Principle question is whether term of contract is impossible to perform. Would cost AC lots of money but is economic benefit to claiming party sufficient to warrant Force Majeure?

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2 minutes ago, UpperDeck said:

Like to see the FM clause in the CUPE contract which guarantees no layoffs for the term of the contract. Principle question is whether term of contract is impossible to perform. Would cost AC lots of money but is economic benefit to claiming party sufficient to warrant Force Majeure?

I don't have the contract handy, but it's explicit in that a pandemic constitutes a force majeure.

I'd regard it as economic suicide for AC to pay 100% of its staff to operate 20% of its schedule.

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