Air Canada

Air Canada reports record revenues despite losing 737 Max for most of the year

An Air Canada Boeing 737 Max 8 departs Vancouver International Airport in February 2019. (photo: Brett Ballah).

Air Canada executives said Tuesday their airline remains strong, despite facing circumstances that would have posed an “existential threat” to the airline just a few years ago.

“I feel 2019 topped an incredible decade of transformation at Air Canada,” said Calin Rovinescu, President and Chief Executive Officer of Air Canada in a conference call announcing the airline’s annual results. “2019 was a year of tremendous adversity.”

Air Canada lost nearly a quarter of its narrow-body fleet when the Boeing 737 Max was grounded around the world after a pair of fatal crashes, taking eight million available seat miles from the air, and forcing the airline to keep older aircraft in the air and scramble to find capacity any way it could.

The max has been grounded around the world since March, and Air Canada has removed the aircraft from its schedule until late June, with no guarantee the aircraft will be in the air by then.

Executives said the Max grounding hurt their strategy to connect passengers from the United States to international destinations, as well as profitable routes from Western Canada to Hawai’i.

“The impact of the Max grounding is perhaps best exemplified by the significant decrease in our profitable Hawai’i operation,” said Lucie Guillemette, the airline’s Chief Commercial Officer. “In the first quarter of 2019, we had six daily flights from Western Canada to Hawai’i with the 737 Max. We have had to halve this operation backfilling capacity with less efficient wide-body aircraft.”

The airline reported that it flew one per cent more miles last year, but said capacity would have grown even faster – more than four per cent – had the planned 36 Max aircraft been in the air.

NOTE: the story has been updated to reflect there would have been 36 Max aircraft in the air in the summer 2019. Air Canada had 24 in the fleet when the plane was grounded in March.

The airline sold more than $19 billion worth of fares in 2019 and has more than $7 billion in the bank. It said the grounding of the Max helped cut capacity in Canada and across North America, while prices were generally trending up.

On top of the service disruptions, the airline continued to pay Max pilots who were not qualified to fly other aircraft. It is negotiating compensation from Boeing, and has already received some money from the manufacturer, which will help reduce the cost of future Max aircraft.

At the same time, executives acknowledged some of the headwinds they faced were of their own making. It changed reservations systems in November, and customers have wasted no time taking to social media to vent their frustrations.

“The introduction of a new reservation system, something we last did 25 years ago, is tantamount to a heart and lung transplant for an airline, never undertaken without residual effects, and we fully appreciate and regret any issues our customers have encountered,” said Rovinescu.

“The system is very, very stable now,” said Guillemette, acknowledging waits to connect with the call centre are still long. “In truth, as we were cutting over at the end of November, we were starting to face the situation with the coronavirus.

“So you can imagine that at that time,” she said, “not only were we cancelling bookings, but we were also re-accommodating customers onto other flights.”

Air Canada reported that its best market was to the United States where revenues jumped seven per cent. In particular, Guillemette said business class performed well on transborder routes.

At the same time, she said the airline was satisfied with the performance of its domestic routes, despite traffic being down slightly and traffic weakness in Western Canada.

The airline is also redeploying capacity from Mainland China – where flights to the mainland are suspended through the end of March – to Europe, where capacity has grown seven per cent this year, putting pressure on airfares and opening up new possibilities for passengers.