Strong revenue flows and improving passenger traffic trends are creating some much-needed lift for Air Canada. On the back of this improved performance, the airline has reversed a decision to cancel part of an A220 order and is taking 737 MAXs earlier than previously forecast.
Better days sees Air Canada rejig aircraft cancelations and deliveries
The changes to aircraft orders were confirmed on Tuesday, November 2, when Air Canada reported strong third-quarter results.
“We are encouraged by the favorable revenue and traffic trends in the third quarter, with strong increases in key passenger geographic segments, a record cargo performance, and significant improvements in both Air Canada Vacations and Aeroplan,” said Air Canada CEO, Michael Rousseau.
“To support our network restoration, we have reversed our decision to cancel two Airbus A220 aircraft orders and are now accelerating deliveries of new Boeing 737 MAX aircraft.”
The two A220 aircraft were part of the 12 Airbus A220-300 aircraft Air Canada had previously determined they would not purchase under an amendment to the purchase agreement concluded with Airbus Canada Limited Partnership in November 2020.
On Tuesday, the airline also said they had reached an agreement with Boeing to accelerate the delivery of four Boeing 737 MAX aircraft into the fourth quarter of 2021, for a total of seven deliveries in 2021.
Nine Boeing 737 MAX aircraft are outstanding. Air Canada now expects delivery by the end of the second quarter of 2022, giving Air Canada a total of forty Boeing 737 MAX aircraft.
Air Canada’s Michael Rousseau reverses the decision of his predecessor
Air Canada canceled its A220 order almost exactly 12 months ago amid significant losses and a drive to cut costs. At the time, then Air Canada CEO Calin Rovinescu said the airline would emerge from the travel downturn a much smaller carrier. Consequently, some aircraft orders would get canceled, and others deferred.
“We are deferring delivery of new Boeing 737-eight and Airbus A220 aircraft scheduled for delivery in 2021 and 2022 and canceling 10 Boeing 737-8s and 12 Airbus A220s, representing about 40% of the remaining scheduled deliveries,” Mr Rovinescu said at the time.
But a year is a long time in the airline industry. The outlook is now improving for Air Canada, and the airline has revised its November 2020 decision.
Quarterly loss but fast-improving cash generation at Air Canada
Meanwhile, Air Canada recorded a net loss of CA$640 million in the third quarter of 2021. Net cash generation of CA$153 million was better than management’s expectation of a net cash burn of between CA$280-to-$460 million.
Michael Rousseau says this result is materially better than expected and as compared to the third quarter of 2020.
“At the end of the third quarter of 2021, Air Canada had about CA$9.5 billion in available liquidity on its balance sheet. This strong liquidity position and the confidence it conveys is a core element of our long-term prospects as we rebuild our airline. We also have about CA$4.9 billion available under undrawn facilities,” he added.
The Canadian flag carrier enjoyed strong advance ticket sales and a significant increase in passengers carried versus both the second quarter of 2021 and the third quarter of 2020. This, along with its strong liquidity position, gives Air Canada added confidence that it is well-positioned to emerge from the travel downturn.
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