Air Canada Rips Trudeau Over Rules, May Cancel Plane Orders

Written by
Sandrine Rastello
Written by

Sandrine Rastello

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(Bloomberg) -- Air Canada escalated a fight with the government of Prime Minister Justin Trudeau over the country's stringent travel rules, threatening to suspend more routes and cancel orders of locally made planes.

Chief Executive Officer Calin Rovinescu lambasted the government during the airline's second-quarter earnings call Friday, saying that current restrictions -- especially a mandatory 14-day quarantine for all travelers coming into Canada, regardless of origin -- are preventing a recovery. Among top global competitors, Air Canada is at an additional disadvantage because the government opted against airline-specific financial aid, he said.

“Without government industry support and as travel restrictions are extended, we'll look at other opportunities to further reduce costs and capital, including further route suspensions and possible cancellations of Boeing and Airbus aircraft on order,” Rovinescu said.

That includes the A220, the former Bombardier Inc. jetliner taken over by Airbus SE that is manufactured in Quebec, he added.

The salvo is the latest display of growing tensions as airlines ask to loosen travel restrictions that have changed little since March, even as the Covid-19 outbreak eases in Canada. Trudeau has retorted that he's putting safety first.

Transport Minister Marc Garneau “recognizes the impact COVID19 is having on the air sector and understands that airlines are facing significant challenges,” his spokeswoman, Livia Belcea, said in a statement to BNN Bloomberg. “As different regions across Canada begin to re-open, we will take a safe, prudent, and collaborative approach, guided by science and public health experts.”

Canada doesn't allow foreign tourists, even from places with few virus cases. Most business travel is banned and everyone coming in must stay isolated for two weeks, including returning Canadian residents with no symptoms, under threat of potential jail time if they break quarantine. An official advisory recommends against non-essential travel.

“Canada needs to find a responsible way to coexist with Covid-19 until there is a vaccine,” Rovinescu said.

The company said revenue dropped 89% in the second quarter and expects capacity to be down 80% in the third quarter from a year ago. Previously it had anticipated a 75% capacity drop. The industry will take at least three years to recover and will shrink, the airline predicted.

Air Canada shares fell 5.6% as of 3:45 p.m. Toronto time to their lowest point since May 15. They're down 69% this year.

The company said it cut C$1.3 billion ($970 million) worth of costs by laying off 20,000 people, suspending 30 routes and retiring 79 aircraft.

Air Canada also raised C$5.5 billion in debt and new equity during the crisis. That included C$788 million from Export Development Canada, a federal government agency, to finance the purchase of 18 Airbus A220 planes. The company has firm orders for 45 and had received seven by June 30.

Despite the cancellation threat, the airline said it's counting on the size and range of the narrow-body aircraft to help it navigate lower passenger demand and sees it as a “cornerstone” of longer-term recovery.