KenHamer

I'm always surprised when people are surprised at how low Air Canada can go. Many of us have known for years. And we've not been quiet about it.

Transpacificflyer

"I would suggest there is little doubt that AC will be able to return to profitability when travel returns to pre-COVID levels."
The conclusion requires travel recovery. It is becoming more likely that business travel will not return to pre-Covid levels for a period much longer than first anticipated. It was the business travel segment which delivered the key contribution to profitability. When someone like Bill Gates predicts that "over 50% of business travel will go away and that that from now on, businesses will have a "very high threshold" for traveling to conduct in-person meetings", it is a good indicator that the Air Canada business model will need to adapt, and I just don't see any evidence of that occurring.

AC seems to be a few strategic steps behind the market changes. It would be political suicide for a government to provide loan guarantees or a cash infusion without an equity guarantee. In 2009, the feds bailed out Ontario's automobile sector in the amount of $13.7 billion. The feds had to write off an estimated $3.7billion. Chrysler went bankrupt and others came up with accounting trickery to avoid repayment. I don't think the feds want a repeat.

Jumper Jack

A CBC story just posted about 30 minutes ago, link is here: https://www.cbc.ca/news/politics/air...d-19-1.5824950

Informative Sections:

EdmFlyBoi

This isn't that surprising. The CEWS is calculated based on a reduction in revenues. If you look at publicly traded companies in Canada, and their relative reduction in revenues, AC as a company may have had one of the largest. So based on how the program worked, they would qualify for a fair bit. Keep in mind that the program is open to all Canadian businesses both large and small where qualification is entirely based on revenue reduction. Whether it is fair or not is a totally different argument...

Cloud Lounger

as there was no doubt employees were taking the reduction of traffic on the chin.

As far as AC holding on to airfares instead of refunding in hopes of getting a bailout on their terms is probably ‘good’ business but is at the same time <redacted>. I would advocate the GOC playing hardball but it won’t alleviate pressure on those individuals who have hundreds/thousands of $$ tied up anytime soon, so AC should not express outrage the next time they get sideswiped by some govt policy. What goes around, comes around.

hoipolloi

video report:

yulred

Quote:

“John Gradek, a former Air Canada executive and lecturer at McGill University's global aviation leadership program, claims the airline industry is "bullying" the government into bailing out the sector, arguing that other countries have already done so. He said Air Canada is playing a "shell game" of its own.”

Into the Theatre of the Absurd now haha. In the middle of a pandemic, the disproportionately negatively impacted airline industry is in a position to bully the government of a G7 country.

Decades of corporate welfarism / regulatory capture reach their logical endpoint, with the Government and Canadian taxpayers/consumers beholden to airlines in an economic crisis, rather than the other way round.

Makes you wonder how broken a market has to be to get to this point.

YZF_Elite

Interesting how the news is portraying all of this as AC received $492 million in subsidies. My understanding of the wage subsidy was that it was a way to maintain workforce attachment and to take the heat off the CERB/EI systems. I'd like to understand how many of these employees end up still employed in a year when things start to get going again. AC certainly benefits from being able to keep employees attached to them and some subsidy of employees during part of the pandemic, but really this benefits the employees and not necessarily the company that much. I'm not passing judgement on the nature of the subsidy, but to say that the company was given $492 M is only part of the story.

Resurrection

Yes, this is just muckraking journalism. The wage subsidy was meant to preserve jobs, not give passenger refunds.

hoipolloi

I think they are trying to make the point that Air Canada is still refusing to refund passengers, even though it is only paying 25% of its active staff salary, while the rest of payroll is borne by Canadian taxpayers.

YOWgary

If their argument is that they'll barely survive financially WITH all this support, why is it surprising that they claim they can't afford refunds?

Note that I'm not arguing that they're right, only suggesting that "we can't afford to keep everyone on the payroll" and "we can't afford to give refunds" are consistent parts of the same argument.

yulred

Depends on the argument, I suppose:

We know the minister (Minister of Transport Marc Garneau) has made it clear that refunds would be required, and based on the size and scale of the program we have no issue, no quarrel with that at all. We have already refunded about $1.2 billion of refundable fares, and of course there’s been a lot of pressure about the non-refundable fares, and so we would definitely do that assuming that the terms of the support package are adequate and that the terms are appropriate and reasonable.”

https://ca.travelpulse.com/news/airl...rovinescu.html

AC tied refunds to a federal bail out on AC’s conditions and terms. If they need a bail out on any conditions (even ones they dictate) then, by your own logic, they will never be able to afford refunds. And off we go in circles.

CBC’s basically holding AC to its publicly stated position - that it will refund if it receives subsidies. CEWS is a subsidy (it’s in the name) and not an insignificant one at that. Perfectly fair to ask why it hasn’t been accompanied by corresponding subsidies. AC claim they haven’t gotten aid, yet they’re sitting on billions (in a way none of their international competitors have been able to) with the explicit permission of the government, and have picked up $100Ms more in wage subsidies. See how the narrative falls apart?

I suppose what we’re witnessing is a PR battle between muckraking journalists and muckflinging hacks. Popcorn please!

skybluesea

delete

tcook052

As has been pointed out CEWS is available to all eligible Canadian businesses so does not constitute aviation sector specific aid which is I believe what Canadian airlines including AC are seeking from the federal government.

yulred

Yes, I’m aware that it’s not sector-specific, but it is a subsidy all the same.

It’s that type of slicing and dicing (not by anyone here in particular, but in general) that has left us with this narrative of endless contradictions, where:

- beggars can be choosers (“we need aid, but will only accept it on our terms”);
- direct and indirect subsidies are dismissed out of hand in aid of an affected victim complex (“Canada is the only one not bailing out airlines”, indirect subsidies like the refund shenanigans notwithstanding); and,
- dogma prevails over fact (no Econ 101 textbook is going to change the fact that there are many partially and fully government owned airlines out there that provide better service to their paying customers - NZ, SQ etc - and now LH?)

I don’t particularly object to AC turning down aid, but to pretend that it has received no aid at all isn’t quite the truth, is it? Which is to say, I think CBC is well within its rights to engage in this “muckraking journalism”. If only to point out all the muck that others are throwing.