WestJet Airlines is slashing 12 per cent of its seat capacity and freezing its spending and hiring as the COVID-19 outbreak reduces demand for air travel.
Calgary-based WestJet said the virus, which the World Health Organization declared a pandemic on Wednesday, has had a “dramatic” effect on its business, which was already battling to overcome the loss of 13 Boeing 737 Max jets that were grounded worldwide a year ago for safety concerns.
“While many actions have been taken to protect the health and safety of our guests, our teams and our business, significantly weakened demand across the network requires us to protect the financial well-being of the WestJet Group of Companies,” said Morgan Bell, a WestJet spokeswoman, declining to provide details.
Larger rival Air Canada has halted flights to Italy, adding to a list of dropped routes that includes China, Toronto-Seoul, Calgary-Tokyo and Toronto-Hong Kong. Air Canada said on Wednesday it will suspend some regional routes as it grapples with weak demand, including Calgary to Medicine Hat, Lethbridge and Terrace at the end of March and Toronto-Sarnia in July.
The global airline industry is cutting routes and withdrawing profit forecasts amid plunging ticket sales. Governments are warning people to limit contact with others to reduce the risks of spreading the deadly virus. The outbreak has led to mass quarantines in Italy, China and other affected areas, and caused the cancellations of business conferences, sporting events and other large gatherings.
The Public Health Agency of Canada said 79 per cent of Canada’s 93 cases as of March 10 were travellers, and another 12 per cent were people who were in contact with travellers.
Prime Minister Justin Trudeau said on Wednesday that he had spoken to the heads of some airlines about their “challenges,” but the $1.1-billion package of measures he announced in response to COVID-19 did not outline any aid to airlines.
The federal government has no immediate plans to provide financial aid to Canada’s airline industry, according to a senior government official. The source said the optics of providing aid to Air Canada would be difficult, given the airline’s profitability and the compensation packaged enjoyed by its chief executive. The carrier made $1.5-billion in profit in 2019.
However, the official said Ottawa is aware that it might be necessary to help WestJet and smaller airlines such as Porter, Bearskin and Sunwing to survive the downturn. The Globe and Mail is not identifying the source because they are not authorized to speak publicly on the matter.
Montreal-based Air Transat, due to begin seasonal flights to Rome and Venice in April and May, respectively, has “consolidated” its flights to Italy, said Christophe Hennebelle, a spokesman. He said more details on the impact of the outbreak will be made available on Thursday when the company releases its quarterly results.
After the 2019 purchase by Onex Corp., WestJet is a privately held company and is not required to report financial results.
The COVID-19 outbreak is expected to slash Air Canada’s 2020 revenue by 15 per cent, and earnings before interest, taxes and depreciation by 20 per cent, said Walter Spracklin, a stock analyst at Royal Bank of Canada. The lost revenue is partly offset by a steep decline in the price of jet fuel, a commodity that accounts for 25 per cent of Air Canada’s costs. Mr. Spracklin said in a research note he assumes the carrier will cut 2020 seat capacity by 13 per cent, led by a 15-per-cent reduction in international markets.
Peter Fitzpatrick, an Air Canada spokesman, said the airline does not disclose financial or sales information outside its quarterly report, scheduled for May 6.
Boeing Co. disclosed on Wednesday that Air Canada has cancelled orders for 11 737 Max 9 passenger jets, a move Air Canada said was made because its long-term fleet requirements changed.
“We placed our original order for the Boeing 737 Max in 2013 with final delivery originally expected in 2021," Mr. Fitzpatrick said. “Since that time, our requirements have evolved, so we are making adjustments to our order to better meet our anticipated needs.” Air Canada has 24 737 Max planes in its fleet, firm orders for 26 more and is “fully committed to the Boeing 737 MAX aircraft,” said Mr. Fitzpatrick, who declined to say if the cancellations were a result of the industry slump, and was not immediately able to say when the order was ordered.
Canadian Labour Congress president Hassan Yussuff said he expects airlines and their suppliers will soon be announcing layoffs. “The aviation sector is on the front line,” he said. “You can’t stop flying to China and restrict your flights to Italy and all these other places and not think it’s going to have an impact on the number of people that they employ.”
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