MONTREAL — Air Canada is better prepared for a potential recession than it was for the financial crisis a decade ago, which plunged the company into five consecutive years of losses, says its second in command.
Deputy CEO and chief financial officer Mike Rousseau said he is “highly confident” that a recession “of equal severity” would weigh far more lightly on the balance sheet of the country’s biggest airline.
“We believe the impact to us would be less than half what the impact was in ’08-09,” Rousseau told attendees at a CIBC investment conference in Montreal Thursday.
He cited more debt-free airplanes, greater flexibility in Air Canada’s labour contracts, its recent purchase of Aeroplan and its low-cost Rouge subsidiary as key differences.
Rousseau brushed aside concerns about ultra-low-cost competitors, which include an expanded Flair Airlines Ltd., soon-to-launch Canada Jetlines Ltd. and WestJet Airlines Ltd.’s Swoop offshoot.
Air Canada has replicated Swoop’s fare structure on some routes and could expand Rouge — launched in 2013 — if budget competition grows, Rousseau said, without naming the rival carrier.
“We don’t think the Canadian market has the same characteristics or dynamics as the U.S. market has, and so we think it’s much more difficult for an ultra-low-cost carrier to develop a strong beachhead in this market,” he said.
With more than $1 billion in losses in 2008 and a share price that tumbled to 78 cents the following year, Air Canada rebounded over the following decade to earn $167 million in 2018 and boost its share price above $43 on Wednesday.
This report by The Canadian Press was first published Sept. 26, 2019.
Companies in this story: (TSX:AC, TSX:WJA)
Christopher Reynolds, The Canadian Press