Canada Spotlight: airline and tourism sectors facing 'catastrophic' decline

The lobby group that represents dozens of air carriers in Canada is warning that, without immediate support from Ottawa, airlines will fold, thousands will be out of work and the travel landscape in will be crippled for the foreseeable future. Prime Minister Justin Trudeau has said help is on the way — but it can't come soon enough for an industry bleeding cash. (Image - Nathan Denette/Canadian Press)

"We recognise there are certain industries that have been extremely hard hit by both the drop in oil prices and the COVID-19 challenge, whether it's airlines or oil and gas or tourism," Trudeau told reporters Tuesday when asked about the prospect of support. "There are significant areas where we're going to have to do more. And as I've said from the very beginning, we will be doing more."

Airports across the country are virtually empty as travellers heed the warnings of public health officials to stay home and avoid all non-essential international and domestic travel to stop the spread of the deadly virus.

"The impact of all this is just devastating. People aren't flying at all or capacity is at 10, 15 per cent. Nobody can sustain that for very much longer, that's for sure," John McKenna, president of the Air Transport Association of Canada, told CBC News.

"We're eagerly awaiting an aviation-specific plan but we haven't heard anything. We have no idea what's coming."

Above - Regional carrier Porter Airlines are based at Toronto Island Airport

(Chris Young/Canadian Press)

His organisation represents both large and small airlines, including Porter — which has grounded its entire operation— leisure carrier Sunwing and more than a dozen regional operators that serve rural and remote communities. McKenna said that some carriers won't make it through this crisis. He warned that the damage to the industry will only increase while it waits for the federal government to act. He said the promised wage subsidies for all businesses will help but his organisation is also looking for interest-free loans to provide carriers with some much-needed capital. He's also asking that certain government fees and surcharges be waived so the companies can stay afloat. He asked that planned changes to the Canada Labour Code — including new rules for rest periods — be deferred to lessen the regulatory burden.

"Give us a break on everything else while we concentrate on surviving. Help us out here," McKenna said. He said some airlines were already in "dire straits" before COVID-19 hit, as carriers had to park their Boeing 737 MAX jets while still paying purchase agreement loans. The 737 Max was grounded worldwide a year ago after an Ethiopian Airlines flight crashed outside of the capital Addis Ababa, killing all 157 people on board.

The blanket travel ban means some debt-laden companies will shutter operations altogether. "You're telling people not to fly. You can't just leave us hanging like that," McKenna said. Finance Minister Bill Morneau announced Tuesday that Ottawa would be waiving rent payments for 21 of the country's airports between March and December 2020.

In Canada, most major airports are operated by independent, non-profit authorities, but the land on which these airports sit is still owned by the federal government. With fewer people flying and paying fees, making the rent is a challenge. Morneau said the rental reprieve recognizes that the air transportation industry has "suffered tremendously." That measure will save airport authorities about $331 million a year in rent payments. But that does little for the national and regional air carriers that fly through them.

"I'd be surprised if we saw any of that," McKenna said.

Above - a solitary passenger at Montreal Trudeau Airport (Ryan Remiorz/Canadian Press)

Larger air carriers like Air Canada and Air Transat have been pressed into service to rescue Canadians stranded abroad by travel restrictions driven by the pandemic's spread, but revenue from other operations has all but evaporated. Air Canada, one of the world's largest airlines, is in the midst of a system-wide shutdown that will result in a stunning 85 to 90 per cent reduction in capacity compared to the same period last year. Starting today, dozens of flights to the U.S. or international destinations will be grounded.

Nearly 17,000 of its employees have been temporarily laid off as the airline tries to protect its balance sheet and avoid bankruptcy. Beyond a few "air bridges" to locations overseas, Air Canada is a fraction of the size it was only a month ago. The company's share price has declined by some 70 per cent from its high in January. "To furlough such a large proportion of our employees is an extremely painful decision but one we are required to take given our dramatically smaller operations for the next while," said Calin Rovinescu, president and CEO of Air Canada.

Major hotels, like Ottawa's iconic Château Laurier, have temporarily closed while others are welcoming fewer than a dozen guests each night. Tony Elenis, president of the Ontario Restaurant Hotel & Motel Association, said hotels are dealing with "a catastrophic" drop in business. "It's the pits," Elenis said.

Some hotels have been asked by provincial health authorities to house some patients in the future as hospital capacity becomes increasingly limited, but the rates will be lower than what they could get from a regular traveller, Elenis said. Regardless, it could be a much-needed source of revenue at a time when properties sit vacant, he said.

Dr. Theresa Tam, chief public health officer of Canada, said Tuesday that governments across the country are readying hotel rooms and other "alternative sites" to house non-COVID-19 patients or those with milder symptoms. Quebec already has rented out a Quality Inn in Laval, Que. for this very purpose, with other sites expected to come online soon as the province grapples with the country's largest caseload. "We're gearing up to accommodate patients. All of us should be working in any way we can to support those who are getting rid of this virus. A lot of hotel managers really want to support this," Elenis said.

© John Paul Tasker/CBC News 2020

Air Canada to lay off 16,500 employees amid pandemic-related flight cancellations

Above - one of Air Canada's new Boeing 787 Dreamliners (Air Canada)

Air Canada will temporarily lay off 16,500 employees starting this week as the airline struggles with fallout from the COVID-19 pandemic. Effective this Friday, the layoffs of 15,200 unionised workers and 1,300 managers will last through April and May amid drastically reduced flight capacity from the Montreal-based airline.

"To furlough such a large proportion of our employees is an extremely painful decision but one we are required to take given our dramatically smaller operations for the next while," chief executive officer Calin Rovinescu said in a statement.

Rovinescu and CFO Michael Rousseau will forego 100 per cent of their salaries for the second quarter, the company said in a statement. Other senior executives will lose between 25 and 50 per cent of their salaries, while members of the board will forego 25 per cent. The airline says it will also stop buying back its shares while the current crisis unfolds. The carrier has halted most of its international and U.S. routes in response to the global shutdown.

Air Canada said its cost reduction scheme aims to save least $500 million. The company will draw down about $1 billion in lines of credit to provide additional liquidity for a carrier that has a $7.3 billion cash cushion to fall back on — more than the most profitable U.S. carrier, Delta Air Lines.

Earlier this month Air Canada's flight attendant union said 5,149 cabin crew would be temporarily laid off due to the COVID-19 outbreak. The newly announced layoffs do not include the earlier job reductions.

WestJet extends international flight suspensions

Above - Parked WestJet Boeing 737s (Mike Symmington/CBC)

WestJet Airlines Ltd. says it is cancelling all transatlantic and U.S. routes until May 4, extending its 30-day suspension by two more weeks. The Calgary-based company will offer no flights to the U.S., Europe, Mexico, Central America and the Caribbean due to the COVID-19 pandemic that has shut borders and sent travel demand tumbling. WestJet has already halved its domestic capacity, while carriers including Porter Airlines and Air Transat have suspended all flights.

Air Canada has cancelled most of its international and U.S. flights in response to the global shutdown.

Last weekend, Prime Minister Justin Trudeau announced a travel ban that bars people with symptoms of the novel coronavirus from domestic flights and intercity trains, effective noon Monday.

The pandemic has cost thousands of jobs in the airline sector and states from Sweden to China to the United States have rolled out aid packages for the airline sector over the past month as borders closed and travel demand plummeted amid the spread of the novel coronavirus.

© CBC News 2020

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