Air Canada COVID-19

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Dear Colleagues,

The global pandemic nature of COVID-19 and the travel restrictions imposed by Governments around the world have resulted in a global crisis for the airline industry like we have not seen before. The velocity of demand deterioration throughout our industry is unprecedented, even when compared to the aftermath of 9-11. For Air Canada, this was exacerbated by the most recent travel restrictions imposed by the United States and Canada over the last days, including those announced by the Prime Minister today. Like most global airlines, we have been adjusting our capacity while continuing to operate safely, helping to bring Canadians home.

We have relied on Canadian and world health organizations and our own medical experts to inform best practices for sanitization, monitoring, reporting and isolation where appropriate. Over the past weeks we have focused on the wellbeing of our people, our customers and our communities, without being alarmist as to next steps. We have worked hard to maintain the integrity of our global network where possible, taking into account the various advisories and restrictions, which have come at us at a very fast pace, without consultation. We have adopted business continuity programs throughout our branches to ensure that we can continue to function.

While we have been measured in our public statements over the past weeks awaiting further developments from appropriate authorities including Canada, the time has come for us to outline the steps that we are targeting to preserve the Company’s financial position in the face of the substantial damage caused by this pandemic:

  • Reduce system-wide capacity for the Second Quarter by approximately 50% – at least 75% over the Pacific and 50% across the Atlantic
  • Park a significant portion of our fleet given the reduced capacity
  • Terminate all third-party aircraft wet lease arrangements
  • Suspend the share buyback under the Normal Course Issuer Bid
  • Implement a company-wide Cost Reduction and Capital Deferral Program, to include cost reductions from the reduced capacity, deferral of aircraft re-configuration and non-aircraft capital expenditures, as well as other initiatives, in a targeted amount of $500 million

The Cost Reduction Program will include but is not limited to:

  • Workplace reductions and other programs, including freezing hiring in all branches immediately
  • Freezing management compensation at 2019 levels
  • Offering voluntary unpaid leaves where available
  • Reducing use of consultants and contractors
  • Suspending product enhancements such as lounge upgrades, etc.
  • Engaging with union representatives to implement workforce reductions, work-rule modifications and other measures under collective agreements

I have stressed many times over the last decade that our best chance for success in our highly competitive and highly volatile world is by having a strong financial position, with a competitive cost structure and a nimble and engaged workforce. This is the time for us to show our mettle. Given our liquidity position and fully funded pension plans, solid balance sheet and higher credit ratings, hard-earned over 10 years, we remain better positioned to weather a storm of this magnitude than many other global carriers and certainly better than ever before in our history.

We understand that the governments of the United States and many European countries such as Germany, France, Italy, Norway and others have approved or are considering assistance for their airline industries in one form or another. Under these circumstances, we believe that the Canadian airline industry should also see similar assistance, whether through forbearance of taxes, landing fees and other charges that form part of the aviation burden in Canada or otherwise until the industry stabilizes. Our industry associations have been and will continue to make these representations to governments. However, we are not awaiting any decision on these measures before implementing our mitigation plan as we believe decisive action is the best course to follow.

We are now operating in full crisis mode, with new developments occurring globally by the hour. But as tough as it is, I am confident Air Canada will get through this. And by taking decisive action now, while protecting our business and as many jobs as possible, we will ensure that we are properly positioned when customers travel again as they surely will.

I intend to personally provide periodic updates in addition to Arielle’s weekly letter. Thank you for all that you are doing, stay safe and continue to deal with our customers and each other with care, class and compassion throughout this crisis.

Sincerely,

Calin