What does the future hold for Canada’s airline industry? - The Orca
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What does the future hold for Canada’s airline industry?

MichaelTaube
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Huge financial losses, massive layoffs and stringent safety protocols for the few remaining passengers add up to massive turbulence.

Many Canadians look forward to travelling when the COVID-19 pandemic comes to an end (whenever that may be). Unfortunately, flying the friendly skies is quickly becoming far less friendly.

Air Canada temporarily suspended all flights to the U.S. on April 26.

Passengers are required to wear masks for the entirety of any trip, and flight attendants will wear protective gear. Boxed meals before boarding have replaced in-flight service, too.

But what happened on Monday’s Air Canada conference call with the media was even more depressing.

Air Canada announced a staggering $1.05-billion loss in the first quarter of 2020. The airline had a profit of $345 million in last year’s first quarter. Operating revenue also dropped from $4.43 billion in 2019 to $3.72 billion in 2020.

“On an adjusted basis,” the Canadian Press reported, “Air Canada says it lost $392 million, or $1.49 per diluted share, in the first quarter of this year compared with an adjusted profit of $17 million, or six cents per diluted share, in the first three months of 2019.”

That’s quite a reversal of fortune.

Second-quarter capacity would be reduced between 85 and 90 per cent from last year’s total, and third-quarter capacity would probably hover at a reduction of 75 per cent.

Air Canada chief executive officer Calin Rovinescu reportedly said on the media call that traditional models for air travel had been “flushed down the proverbial toilet.” This led BNN Bloomberg reporter Paige Ellis to quip on Twitter, “At least he still has his sense of humour?”

Better to laugh than cry, I suppose.

Air Canada has had its share of financial highs and lows.

Formerly under Canada National Railway’s umbrella, it was privatized in 1989. The airline purchased its biggest domestic competitor, Canadian Airlines, in 2000, and acquired Transat A.T. Inc. in 2019 (subject to approval by federal regulators).

Air Canada slipped into bankruptcy protection between 2003 and 2004, and almost faced the same fate in 2009 until it was bailed out by the federal Conservative government led by then-prime minister Stephen Harper.

Will Liberal Prime Minister Justin Trudeau have to follow his predecessor’s lead?

The likelihood seems pretty strong. It’s difficult for Ottawa to let an 83-year-old company that’s long symbolized Canadian air travel simply fall apart.

The airline’s financial decline in 2020 is, and will be, much worse than that of 11 years ago. And if Trudeau lets Air Canada sink into the financial abyss (which isn’t in his political DNA), his minority government would crumble.

What about Canada’s other airlines? They’re smaller but couldn’t they pick up some of the slack in a post-COVID-19 world?

That’s a dicey proposition at best.

WestJet, which is Canada’s second-largest air carrier, also introduced a mask requirement for passengers. Anyone who requests a middle seat will be declined – similar to U.S.-based Delta Airlines – and only passengers who booked together will be paired up.

International flights were shut down by WestJet on March 17. A week later, 6,900 employees – slightly less than half its total staff – were laid off, although the federal wage subsidy allowed for the temporary rehire of 6,400 employees on April 9.

This euphoria didn’t last long. WestJet abruptly laid off 1,700 pilots on April 17, followed by 3,000 more employees on April 22.

Porter Airlines, the country’s third-biggest air carrier, announced on March 18 that all domestic and international flights would be suspended from March 20 to June 1 due to COVID-19.

The next-biggest carrier, Sunwing Airlines, followed suit and laid off its staff of 470 pilots and 1,063 flight attendants between April 1 and 8.

What does all this mean?

Reduced seating capacity and reduced ticket availability on airlines, for one thing.

Prices could go through the roof to make up for losses during the pandemic.

The possibility of following the lead of several European airlines in permanently removing rows on flights looms large.

What a mess. It’s enough to make you want to stay home for good.

Michael Taube, a Troy Media syndicated columnist and political commentator, was a speechwriter for former Canadian prime minister Stephen Harper.

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