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May 7, 2021

Air Canada pleads with Trudeau for plan to ease travel rules

David Burrows discusses Air Canada

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Flush with bailout funds, Air Canada called on the government of its home country to lay out a plan for reopening borders as vaccination progresses.

Canada’s biggest air carrier is in a position to ramp up operations after reaching a deal for nearly $5.9 billion (US$4.8 billion) in debt and equity with the federal government last month. Chief Executive Officer Michael Rousseau said it’s now “essential” for officials to follow the U.S. in easing rules that have stopped most air travel.

“Starting with replacing blanket restrictions with science-based testing and limited quarantine measures where appropriate, Canada can reopen and safely ease travel restrictions as vaccination programs roll out,” Rousseau said in a statement accompanying first-quarter results that included an 80 per cent revenue decline from the same period in 2020.

“We have seen elsewhere, notably in the U.S., that travel rebounds sharply as COVID-19 recedes and restrictions are lifted, and we fully expect this can be replicated in Canada,” Rousseau said.

Canada has barred many foreign nationals from entering the country since last March and requires a two-week quarantine for some arriving travelers -- including a hotel stay at their own cost. Eastern provinces have also adopted restrictions on travelers from other parts of Canada.

The hotel quarantine became mandatory earlier this year for passengers awaiting test results, but it’s been undermined by travelers who have opted to pay a fine instead.

It “has proven ineffective,” Rousseau said on a call with analysts. “It should be eliminated.”

That approach has reduced Canadian air travel to a trickle. Average passenger traffic at the largest Canadian airports’ checkpoints in April was just 8 per cent of 2019 levels, versus 59 per cent in the U.S., where vaccination has proceeded more quickly, according to data from the countries’ transport security authorities.

Air Canada says there’s pent-up demand for both leisure and business travel. Conversations with corporate clients suggest a recovery will start in September, Rousseau said.

The airline is already seeing solid bookings for warm destinations like Florida and the Caribbean for late 2021 and early 2022, according to Chief Commercial Officer Lucie Guillemette. There’s been an uptick in international travel demand for the summer as well, she said.

Air Canada shares were up 2.7 per cent in Toronto at 11:43 a.m. They’re up 15 per cent this year.

Prime Minister Justin Trudeau’s government has shared no details about when border rules might ease or what the criteria will be for doing so, though at a news conference this week he signaled support for a vaccine passport and raised the possibility that travel might resume this summer.

Air Canada doesn’t have any direct sign from the government on what will trigger a reopening but has been having positive discussions, Rousseau said. There’s “a fair amount of work being done behind the scenes,” he said.

For now, the country is still grappling with a third wave of infections, and its vaccination campaign is still beset by supply hurdles and confusion. About 30 per cent of Canadians have received a first dose, compared with 45 per cent in the U.S. and 52 per cent in the U.K, according to the Bloomberg Vaccine Tracker. But fewer than 3 per cent in Canada are fully vaccinated.

Montreal-based Air Canada, which ramped up cargo shipments during the crisis, reported operating revenue that beat analysts’ estimates. Still, it expects capacity in the second quarter to be 84 per cent lower than the 2019 level.

During the quarter, it burned about $14 million a day on average, less than the $15 million to $17 million it had expected. It forecasted about the same for the current quarter, with a range of $13 million to $15 million a day, and indicated that there would be no meaningful improvements.