Air Canada cuts seat capacity in half, eliminates routes as Ottawa warns against international travel

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Air Canada has cut seat capacity by 50 per cent as Canada’s largest airline eliminates routes and parks planes amid government warnings against international travel to fight the global COVID-19 pandemic.

Air Canada offered its first look at the financial impact of the global plunge in demand for travel, calling for government aid hours before Prime Minister Justin Trudeau announced new measures to prevent the entry of new cases of the deadly virus.

Travellers who are not Canadians or permanent residents will be barred from entering Canada, with the exception of U.S. citizens, diplomats and air crews, Mr. Trudeau said in Ottawa. Inbound international flights as of March 18 will be restricted to four airports, Montreal, Toronto, Calgary and Vancouver, to allow better illness screening of passengers. And airlines must not board any passenger to Canada with COVID-19 symptoms, Mr. Trudeau said.

Governments around the world are telling people to avoid international travel and large groups, and stay home to slow the pandemic. Domestic carriers including Air Canada and WestJet Airlines and their global rivals are parking planes, suspending routes and cutting costs as they seek government assistance to enable them to weather the plunge in demand for travel.

Calgary-based WestJet Airlines, Canada’s second-biggest carrier, has idled 60 per cent of international capacity and at least 40 per cent of domestic routes, and warned of job losses in an “unprecedented” and quickly changing environment.

Air Canada has suspended at least 18 transatlantic routes, including flights to Madrid, Rome and London, on top of several Asian destinations, two in South America and four domestic flights.

“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 COVID-19 outbreak and travel restrictions imposed in many countries around the world, including Canada and the United States,” Air Canada said.

Air Canada said on Monday it is withdrawing its financial guidance for 2020 and 2021, but is confident it has the cash to survive a steep drop in demand for air travel that is threatening the survival of the world’s air carriers. As of March 31, the carrier had $7.1-billion in cash, cash equivalents and short- and long-term investments, as well as a $200-million credit facility it will draw on next week.

To preserve cash, Air Canada said it is targeting $500-million in cost reductions and capital spending deferrals. It has suspended its share repurchase program and is using its US$600-million credit facility as it tries to raise more money with several parties over the coming weeks.

Air Canada’s share price fell by 28 per cent in trading on the Toronto Stock Exchange on Monday, for a drop of about 58 per cent since mid-February.

The world’s largest airlines have banded together to call on governments to help offset soaring losses owing to the new coronavirus outbreak.

Calin Rovinescu, chief executive of Air Canada, said Canadian airlines should receive government financial aid in the form of tax cuts and breaks on landing fees and other charges until the travel industry stabilizes.

"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,” Mr. Rovinescu said.

“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.”

In a joint open letter, the oneworld, SkyTeam and Star Alliance members, which include nearly 60 airlines, urged governments and regulators “to evaluate all possible means to assist the airline industry during this unprecedented period.”

In a blunt assessment released Monday, the Centre for Aviation, an industry analyst, said that by the end of May, 2020, "most airlines in the world will be bankrupt.” It added that “co-ordinated government and industry action is needed now if catastrophe is to be avoided.”

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