Air Canada caps 'bleakest year' in aviation history with $1.16B quarterly loss

Air Canada posted a staggering $1.16 billion loss in the fourth quarter of 2020, a result that caps off what the company's chief executive called the bleakest year in aviation history.

Despite the losses, Air Canada president and CEO Calin Rovinescu said on a call with analysts Friday morning that he was encouraged by the progress of recent talks with the federal government about a bailout package for the sector, which have been ongoing for months without a resolution.

"While there is no assurance at this stage that we will arrive at a definitive agreement on sector support, I am more optimistic on this front for the first time," Rovinescu said.

The discussions have ramped up over the last several weeks, reaching a pace that Rovinescu called a negotiation. Any deal would include a resolution on passenger refunds, a plan for returning service to regional markets and financial support for the aerospace sector, Rovinescu said.

Rovinescu also hinted at potential reforms coming to Canada's travel restrictions this spring, saying that he expected an increased COVID-19 testing program to replace some quarantine measures by the time airlines are scheduled to resume many flights on April 30.

The company released its earnings report on the heels of last night's news that the Canadian government approved Air Canada's $190-million purchase of Transat A.T.

WestJet objects

In a statement Friday, WestJet Airlines Ltd. criticized the government's approval of the deal, saying the acquisition would be harmful for consumers.

"This decision shows blatant disregard for all Canadians who believe in healthy competition," WestJet president and CEO Ed Sims said. "When Canadians look to explore the world and reunite with family and friends once again, they will face fewer choices and higher fares."

Air Canada reported a fourth quarter net loss of $3.91 per diluted share, compared with profit of 56 cents per diluted share or $152 million a year earlier.

The airline's operating revenue dropped to $827 million in the fourth quarter, down from $4.43 billion in the same three months of 2019, as the COVID-19 pandemic has hampered air travel.

Analysts polled by financial data firm Refinitiv expected Air Canada to lose $735.67 million or $2.84 per share, on revenue of $885.36 million.

For the full-year, Air Canada lost $4.65 billion or $16.47 per diluted share on $5.83 billion of revenues. That compared with a profit of $1.48 billion or $5.44 per share on $19.13 billion of revenues in 2019.

The airline capped a tough close to 2020 as expected with challenges extending into 2021, said Doug Taylor of Canaccord Genuity.

He pointed to Air Canada lowering its capacity outlook for the first quarter from a month ago, reflecting more severe travel restrictions.

The company achieved $1.7 billion in cost savings last year and has lowered its planned capital spending between 2020 and 2023 by $3 billion compared to the projected spending as the end of 2019.

Passenger loads fall 73%

As the pandemic sapped demand for air travel, Air Canada's passenger numbers declined 73 per cent in 2020 following several years of record growth for the airline, Rovinescu said.

Transport Minister Omar Alghabra said Thursday evening that the proposed purchase of Transat A.T. by Air Canada will bring greater stability to Canada's air transport market amid devastating impact of the COVID-19 pandemic on the industry.

Rovinescu, who has been at the helm of Air Canada since April 2009, said on his last earnings call before his retirement on Monday that he had confidence in the long-term future of the company, despite the challenges of the pandemic.

"Above all, it must be remembered that the effects of COVID-19 are transitory," Rovinescu said.

Air Canada's shares gained $1.07 or five per cent at $22.27 in late morning trading on the Toronto Stock Exchange