Air Canada 'turning a corner' as restrictions ease, bookings increase

·3 min read

Air Canada's chief executive says the company is "turning a corner" and expects financial results to start improving as vaccination rates increase, travel restrictions ease and travellers begin booking trips.

"Indications are that the worst effects of the COVID-19 pandemic may now be behind us," CEO Michael Rousseau said on a conference call with analysts Friday morning. 

"Based on what we are seeing in other markets that are further along in reopening in Canada, we anticipate travel will resume at a quickening pace... bookings are accelerating, and our own customer surveys indicate a strengthening of intent to travel within the coming months." 

The COVID-19 pandemic still weighed on the Montreal-based company's second-quarter results, although the situation is improving as more people begin travelling again. Air Canada says an increase in travel demand helped narrow its net loss in the three-month period ending June 30 to $1.17 billion, or $3.31 per share, an improvement from last year's net loss of $1.75 billion, or $6.44 per share. The company reported sales of $837 million, a $310 million increase compared to the same period last year. It also burned through $8 million of cash per day in the quarter, an improvement from its previous rate of between $13 million and $15 million per day. 

Bookings are still below pre-pandemic levels, but the company says it started to see "a significant increase" in bookings after the federal government announced it would be eliminating the quarantine period for fully vaccinated travellers. Ottawa announced this week that it will reopen its border to fully vaccinated travellers from the United States as of Aug. 9, while fully vaccinated visitors from other countries will be able to enter Canada as of Sept. 7. 

Lucie Guillemette, Air Canada's chief commercial officer, said on Friday that the airline plans on operating 85 per cent more capacity in the upcoming quarter than it did in 2020 in order to "seize the momentum and bookings due to the easing of travel restrictions." The boost represents a capacity decrease of 25 per cent compared to 2019, before the pandemic struck and disrupted the travel industry. 

So far, domestic travel has led the way in terms of recovery, Guillemette says, but travellers are increasingly booking flights to leisure destinations in the U.S., and Europe, including to France, Italy and Greece. While the Pacific market remains uncertain due to restrictions that are still in place in some countries, there are other bright spots when it comes to growing demand. 

"When looking to the sun markets, we are very optimistic about our recovery... we're currently observing demand growth that is above 2019 levels," Guillemette told analysts. 

"Should demand trends continue, we will evaluate redeploying capacity from other parts of our network to service demand." 

As leisure travel demand ramps up in Canada, airlines are expanding operations to try to capitalize on Canadians' desire to travel. Porter Airlines announced last week it will purchase up to 80 new aircraft and start flying out of Toronto's Pearson International Airport, allowing the company to serve more destinations. 

Rousseau says the airline welcomes competition and that it will "make us better." 

"Certainly it hasn't gone unnoticed that Porter is looking to expand," he said. 

"We certainly welcome healthy competition, but suffice to say, we will be ready to deal with that situation as they start ramping up in the second half of next year. We have a lot of things to work with." 

In April, Air Canada struck a deal with the federal government for a financial aid package worth as much as $5.9 billion.

Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.

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