Air Canada posted its financial results for the second quarter of 2021 on Friday (July 23), reporting a net loss of $1.17 billion or $3.31 per diluted share.
The company’s losses have begun to narrow as the demand for travel gradually returns due to the loosening of travel restrictions and higher vaccination rates.
Air Canada’s net loss, by comparison, was $1.75 billion, or $6.44 per share, a year earlier.
“The elimination of the quarantine period for fully vaccinated returning Canadians and the removal of other travel restrictions announced in June led to a significant increase in bookings,” said Michael Rousseau, president and chief executive officer of Air Canada in a statement.
Since July 5, fully vaccinated Canadians and permanent residents, arriving in the country by land or air, have been able to skip the previously-mandatory quarantine and day-8 test requirements.
As of Aug. 9, Canada will allow fully vaccinated U.S. tourists to enter the country and international travellers from other countries will have the same privilege starting Sept. 7.
The uptick in bookings is a trend that Rousseau expects to “further increase” as travel restrictions ease further.
“Our employees and other stakeholders should be encouraged by the positive industry trends and the strong improvement in the outlook we see for our airline,” Mr. Rousseau said.
The CEO said Air Canada will continue to manage both its cost structure and balance sheet “very conservatively.”
“We are turning a corner”
Air Canada’s Q2 cash burn was around $8 million, on average, per day – which was “better than earlier projections of $13-$15 million,” Rousseau noted.
Air Canada ended the quarter with close to $9.8 billion in unrestricted liquidity.
The company’s operating revenues were $837 million, representing an increase of $310 million, or 59 per cent, from the second quarter of 2020.
Q2 net cash flows used in operating activities of $1.377 billion deteriorated by $126 million from the same quarter in 2020 due to a decrease in cash from working capital.
This was mainly attributable to ticket refunds of $997 million, which was partially offset by an improvement in advance ticket sales, the airline said.
Mr. Rousseau, however, said Air Canada is “turning a corner” as the easing of travel rules allows more customers to travel while also boosting the market’s confidence in making travel plans.
“We can optimistically say that we are turning a corner and expect to soon see correlated financial improvements as evidenced by our cash burn guidance of $3-$5 million per day for the third quarter,” Mr. Rousseau said.
"We are excited and ready to welcome back our valued customers in greater numbers and to introduce them to the many improvements we have made to enhance their journey.”
“I remain fully confident that Air Canada will rebuild stronger and rise higher than ever before.”
Seat capacity up 78%
Air Canada increased its ASM capacity in Q2 by 78 per cent compared to the second quarter of 2020.
On June 15, Air Canada announced its domestic summer schedule serving a total of 50 Canadian destinations from coast to coast.
This same month, the airline unveiled an international schedule for Summer 2021 and an expanded service to Hawaii for Winter 2022.
This summer, Air Canada plans to resume 17 global routes and 11 destinations from its hubs.
On July 19, Air Canada unveiled its summer transborder schedule, including 55 routes and 34 destinations in the U.S., with up to 220 daily flights between the U.S. and Canada.
The new schedule coincides with relaxed travel rules between the two countries beginning Aug. 9, including the removal of hotel quarantine for all travellers, relaxed testing requirements for Canadians travelling to the U.S. for less than 72 hours, and allowing fully vaccinated citizens and permanent residents of the U.S. to enter Canada for non-essential travel.
Financing & refunds
On April 12, 2021, Air Canada entered into a financing agreement with the Government of Canada which allowed the company to access up to $5.879 billion in liquidity through the Large Employer Emergency Financing Facility (LEEFF) program.
The financial package provides for fully repayable loans that Air Canada would draw down if and as required.
In April, 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.
Earlier this month, the deadline to seek a refund under the company’s COVID-19 Refund Policy was extended to July 12, 2021.
Air Canada says it has paid $997 million as at the end of the second quarter and expects to pay about an additional $200 million in the third quarter, which will be eligible for draws under the Government of Canada $1.404 billion refund credit facility.
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