In an Aviation Week “Fireside Chat” webinar on 11JUN20, Air Canada’s President and CEO, Calin Rovinescu, described how the airline is navigating the crisis, its strategy, and the hurdles still obstructing a return to a more fluid air transport network, now that many countries are slowly coming out of the COVID-19 pandemic.
“We’ve moved very, very quickly from a very severe human tragedy, which of course is not completely dealt with yet by any stretch of the imagination, to one that is catastrophic for our
industry and, quite frankly, in my estimation, an economic tragedy. It’s a train coming barreling at us that we have to be very, very mindful as to how we are going to deal with it.”
Calin Rovinescu set the scene right from the start, moving on to explain Air Canada’s early “three bucket” approach to tackling that train, almost already before the pandemic moved out of China, and being one of the first airlines to stop flying there early on for crew safety reasons:
- Stabilizing the company and raising liquidity to survive – having started the year on a very healthy 7 billion CAD balance sheet and raising another 4 billion,
- building a sense of confidence in the travelling public – Air Canada already reacted well ahead of IATA and ICAO protocol on hygiene guidelines, by being the first to adopt wearing masks, temperature checks and disinfecting cabins, for example, and
- which he stated was the most challenging: dealing with the government’s behavior in relation to the aviation industry and the economy in general.
“It’s not like re-opening a pizzeria!”
Currently, only 5% of passengers are flying Air Canada compared to previous year, and Rovinescu is frustrated at the highly complex environment hindering the aviation business. He outlines five barriers:
- no foreign nationals being allowed into Canada,
- the 14-day quarantine for those entering,
- not knowing when the Canada/U.S. border will reopen, Air Canada’s largest market,
- various Canadian provinces having implemented cross-country travel constraints on top of the government’s, and
- the general advice to avoid all travel, meaning that those wishing to travel have problems buying insurance.
Longing for a more thoughtful approach as is being taken in the EU, he points out to the government, that re-starting airline operations is hugely different to re-opening a pizzeria, since there
are so many factors to consider and prepare in advance, such as aircraft maintenance, crew disposition and training, complex fleet management, connecting traffic schedules, re-starting service
deliveries from partners, and the list goes on.
No expectation of a V-shaped recovery
Given those restrictions, the uncertainty of how long this situation will last, and the complexity of getting started again across the world, a V-shaped recovery is out of the question. Rovinescu believes that April and the first week of May were the bottom of the crisis and now, in the hope that governments will soon enable airlines to “do a reasonable amount of business,” he expects to move from 5% passenger numbers currently to around 25% in the third quarter of this year (but assuming market access, which he hopes will be granted soon given the handing over to government of a letter on 11JUN20, signed by 120 companies across Canada’s travel and tourism branch this week, requesting greater travel freedom), and emphasizes that it will take “a minimum of three years to get back to 2019 levels.”
“Our philosophy is to try to do as much on our own as we can.”
With USD 123 billion having been shelled out in various forms of state aid to airlines across the world, and with North America being the second hardest hit in global revenue loss forecasts, it is nothing short of amazing that Air Canada, ranked 14th in airline size, is the only one of the Top 20 airlines not to have received a state grant thus far. Repeating the solid ground Air Canada was on prior to the start of the crisis, and its quick reaction on sourcing additional equity, he pointed out that “No carrier has been configured to last a long time without revenue,” revealing that Air Canada is losing around 22 million CAD a day, or 660 million a month, and regretted having had to make the decision to let go of 20,000 staff (including 35% in management) to ensure the survival of the enterprise. A fleet reduction of 79 aircraft, and a simplification with the removal of its 767s and EMB190s, was another of a number of cost-cutting measures. “We built a highly-competitive airline over the last decade,” he says, and underlines that the company is better off going without loans that often come with unfortunate strings attached, and which in the past, have mostly done more harm than good to those airlines receiving them.
A bright light that could be here to stay a while
Asked about the decision to convert some passenger aircraft to temporary freighters, Rovinescu was emphatic in his praise for his staff: “This has been one of the very bright lights amongst a sea of bad news. The cargo operation here at Air Canada has been phenomenal and I am very proud and impressed with both the cargo team and the maintenance team that was able to convert some of our 777s and 330s into a modified cargo version. We were amongst the first to have done that and, believe it or not, we have now operated more than 1,500 cargo-only flights since MAR20. A phenomenal success story, whilst recognizing that the numbers are not in the same magnitude as with passenger aircraft.”
Air Canada’s approach is to make the most out of every opportunity, and the success thus far is such, that some passenger sales teams have been allocated to work on the cargo side to cope with the flows. The expectation, he stated, “is that this will continue even when we have more passenger visibility. We will continue stay in this modified environment and take it from there.”
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