Air Canada threatens to cancel Airbus A220 order if government doesn't ease restrictions

Air Canada is fed up with the Canadian government's travel restrictions and is threatening to cancel its order for the made-in-Canada Airbus A220 to get them eased.

A combination of international arrival restrictions, including the closure of the U.S.-Canada border, plus internal restrictions and quarantines has hit the Montreal-based carrier hard, said Air Canada CEO Calin Rovinescu during a second quarter earnings call Friday. On top of this, the Canadian government has provided minimal financial support beyond an employee wage subsidy program.

"Without government industry support and as travel restrictions are extended, we will look at other opportunities to reduce costs and capital, including further route suspensions and possible cancellations of Boeing and Airbus aircraft on order," he said.

Sign up for the free daily TPG newsletter for more airline news!

Key to Rovinescu's threat is Air Canada's order for 38 A220-300s -- it already flies seven of the jets. The jets were designed by Montreal-based Bombardier and acquired by Airbus in 2018, and are assembled at Montreal Mirabel (YMX) airport. A plant that employs hundreds of Canadians.

Air Canada has already dropped eight smaller Canadian cities from its map and ended service on 30 routes due to COVID-19. Many believe the map paring is part of the airline's ongoing campaign to get the government to ease restrictions and provide some form of aid.

The airline reported a net loss of Canadian dollar 1.75 billion ($1.28 billion) in the second quarter. Passenger traffic fell by nearly 97% compared to the same three-month period in 2019.

Related: Air Canada drops 8 cities from route map amid coronavirus adjustments

Air Canada does not envision a market where all travel restrictions are lifted. Citing the continuing pandemic, Rovinescu called for lesser "science-based measures" based on the European Union model. This could allow some travel to resume while presumably keeping the virus at bay.

Daily Newsletter

Reward your inbox with the TPG Daily newsletter

Join over 700,000 readers for breaking news, in-depth guides and exclusive deals from TPG’s experts

Email address

Sign up

By signing up, you will receive newsletters and promotional content and agree to our Terms of Use and acknowledge the data practices in our Privacy Policy. You may unsubscribe at any time.

Despite threatening its order, Air Canada still envisions the A220 as central to its future fleet and map. The airline's chief commercial officer Lucie Guillemette said Thursday July 30 the jet will be a "cornerstone of some of our longer term recovery."

Both the plane's capabilities, which includes added range and improved efficiency compared to older aircraft its size, and positive customer feedback have exceeded Air Canada's expectations, she added.

Related: First look onboard Air Canada's first Airbus A220

The carrier introduced the A220 in January, debuting it on flights between Montreal Trudeau (YUL) and Calgary (YYC). TPG's Zach Griff called the jet a "joy to fly" after riding on the inaugural sortie.

Air Canada has moved forward with plans to retire 79 jets from its fleet. It removed all 30 of its Boeing 767s -- including the 25 at its budget arm Rouge -- as well as its remaining 14 Embraer E190s and six Airbus A319s, between April and June, a quarterly financial filing shows. Another 29 of its A319s are slated for retirement in the next few months.

"Although we will emerge smaller with fewer aircraft, fewer people and fewer cities served… we will be nimbler and more competitive," said Rovinescu.

Related: Global air travel unlikely to recover until 2024 as COVID remains 'issue' in US, elsewhere