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Air Canada will cancel some of its orders for Boeing 737 MAX and Airbus A220 jets trying to mitigate the losses it faced due to Covid-19. The number of canceled orders represents 40% of the company’s total deliveries.
This uneasy step announced during Air Canada’s earnings call on Monday is inevitable as the company’s losses reached $785 million in Q3 because of an 86 % drop in demand compared to Q3 of 2019. Along with the cancellations, the airline revealed its plan to accelerate the retirement of 79 aircraft flying for the mainline and LCC Air Canada Rouge.
The Air Canada’s President and Chief Executive Officer, Calin Rovinescu, admitted: “We are deferring delivery of new Boeing 737-8 and Airbus A220 aircraft scheduled for delivery in 2021 and 2022 and canceling 10 Boeing 737-8s and 12 Airbus A220s, representing about 40 % of the remaining scheduled deliveries.”
Although the new Boeing 737 MAX and Airbus A220 jets are being postponed, the company reassures these two planes will be the “heart of its single-aisle fleet, allowing it to make transcontinental and international domestic flights with neighboring countries, due to its improved economy and greater reach.” However, the airline is still expecting the delivery of 5 A220s this quarter.
The ongoing restructuring and other capital reduction activities are estimated to save $3 billion in capital expenditures over 2020 to 2023, compared with foreseen capital expenditures at the end of 2019.
Air Canada reduced passenger carrying capacity by 92 % in Q2 and by 81 % in Q3 versus the same quarters in 2019 and is going to decrease Q4 capacity by 75%. The drastic measures are deriving from travel restrictions, quarantines, and border closures.