Air Canada cancels 12 Airbus A220 and 10,737 MAX orders

Air Canada lost over half a billion dollars in the last quarter and, despite reducing its cash consumption to about $ 7 billion per day, it expects a difficult winter. As part of his efforts to improve his position, he has postponed some deliveries of new narrow-body aircraft. More importantly, it also canceled orders for 10 Boeing 737 MAXs and 12 Airbus A220s entirely.

Postponement and cancellations

Air Canada’s third quarter results are and are as gloomy as expected. Overall, the airline reported a net loss of Cdn $ 685 million ($ 526 million) for the quarter. This is an 86% drop from its performance last year and has led the airline to take important steps to improve its liquidity position.

The president and CEO of the airline, Calin Rovinescu, pointed out that Air Canada and its subsidiary Rouge will come back from the crisis with much smaller fleets. A total of 79 aircraft from the two fleets will take early retirement. In addition, orders with Airbus and Boeing have been canceled or deferred. He said,

“We are postponing the delivery of the new Boeing 737-8 and Airbus A220, which are scheduled for delivery in 2021 and 2022, and are canceling 10 Boeing 737-8 and 12 Airbus A220s, or around 40% of the remaining scheduled deliveries.”

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Rovinescu noted that despite changing these orders, the airline considers these planes to still be the core of its narrow-body fleet. His words suggest a commitment to the guys that remains, even though the order book has shrunk. He concluded,

“Through this fleet restructuring and other capital reduction initiatives, we have been able to reduce total projected capital spending by approximately $ 3.0 billion over the period 2020 to 2023 relative to our spending. in total fixed assets projected at the end of 2019. ”

Fight for survival

These aircraft deferrals and order cancellations are part of a series of measures Air Canada is taking to improve its liquidity position. Since March, the airline says it has secured an additional CA $ 6 billion ($ 4.6 billion) in additional cash from what the CEO calls “ the painful steps ” of laying off 20,000 jobs and reducing capacity. more than 80% during the quarter.

It’s also working to keep costs down, and in the third quarter said it reduced its cash consumption to C $ 9 million per day ($ 7 million), improving the expected burn rate from $ 15 million to $ 17 million. Canadian dollars per day (11.5 to 13 million). However, he warned that in the fourth quarter it is still expected to burn C $ 12-14 million per day ($ 9-11 million) due to increased end-of-lease payments and higher expenses. linked to the inevitable deliveries of A220.

Rovinescu criticized the mandatory quarantine of passengers arriving in Canada, citing the airline’s own trial in partnership with Toronto Pearson Airport as evidence of viable alternatives. He said,

“Of the various scientific measures we advocate, testing at airports is by far the most important, as demonstrated by the McMaster HealthLabs study of international travelers arriving at Toronto-Pearson. It was the largest study ever of its kind and preliminary results clearly confirm that there are safe alternatives to a mandatory 14-day quarantine, which stifles demand and frustrates travelers who want to get tested.

Despite the challenges the airline faces, it remains focused on the future. The results detailed its COVID-19 mitigation and recovery plan, which encompasses elements of customer service and security as well as ongoing capacity, network and financial metrics management. He says he is proceeding with the proposed acquisition of Transat AT Inc and is continuing discussions with the Government of Canada on travel restrictions and additional financial support for the industry.