Air Canada, Porter Take Flight Again as Canada Reopens

Madhu Unnikrishnan
July 12th, 2021 at 12:01 AM EDT

Air Canada is returning to nine long-haul destinations this summer as Canadian airlines begin to spool up their schedules amid the country’s gradual reopening.

The Star Alliance carrier will resume flights on 17 routes from its Montreal, Toronto Pearson, and Vancouver gateways in July and August, Air Canada said last week. Athens, Casablanca, Dublin, Dubai, Geneva, Lisbon, Rome, Vienna and Zurich have or are returning to its map this summer. All in, Air Canada will fly as much as 35 percent of its 2019 capacity by August — its highest since the crisis began — according to Cirium schedules.

The additions are the latest in Canadian airlines’ service resumptions amid loosening travel restrictions both within the country and for international arrivals. Mandatory hotel quarantines for international arrivals were dropped for fully vaccinated travelers on July 5, and provincial restrictions have eased as well. The lessening comes as Canada’s vaccination rate steadily climbs: 31 percent of people 12 years or older were fully inoculated and nearly 77 percent had received at least one vaccine dose as of July 5.

Citing the vaccine roll out and the easing of both some federal and provincial travel restrictions, Air Canada Senior Vice President of Network Planning and Revenue Management Mark Galardo said last week that the “summer is looking brighter.” The airline has seen an uptick in travel demand in just the past few weeks, he added.

At the same time, Ottawa is coughing up more relief for the country’s beleaguered carriers. Porter Airlines is the latest recipient with an agreement for up to CAD$270 million ($217 million) in government loans and grants. Air Canada and Transat previously received federal aid. As a condition to the relief, all three carriers have agreed to provide refunds to travelers whose travel was affected by the pandemic.

The relief will allow Porter to resume flights in September after an 18-month suspension that began in March 2020 and had many speculating whether the quirky carrier would ever return. Initially, the airline will offer flights between its Toronto Billy Bishop base and Montreal, Ottawa and Thunder Bay on September 8, and expand to Boston, Chicago Midway, Halifax, Moncton, Newark, Quebec City, St. John’s and Washington Dulles by the end of the month.

“This is the moment our team members, passengers and the communities we serve have been waiting for,” Porter CEO Michael Deluce said in a statement. “The pandemic has progressed to the point that we can now begin restoring service across our network.”

Canada’s second largest carrier, WestJet, is notably absent from the list of airlines receiving government relief. But that has not stopped WestJet from resuming flights and adding new markets to take advantage of what travel recovery occurs this summer. The airline has returned to destinations it suspended in Atlantic Canada and will add 11 new domestic routes by the end of July. WestJet has even plans its first-ever service to Amsterdam in August.

Altogether, WestJet could fly as much as 78 percent of its pre-crisis system capacity — and 98 percent of domestic capacity — by August, Cirium schedule data show. No small step for an airline that, as recently as March, was flying just 7 percent of what it flew two years earlier.

A WestJet spokesperson said the airline “continues discussions” with the Canadian government on a possible relief package.

The developments at Canadian carriers may signal the sustained travel recovery that they have waited for since Covid-19 decimated air travel more than a year ago. However, the recovery comes with a number of major caveats. For one, the international connecting traffic between the U.S. and both Asia and Europe that Air Canada relies on remains moribund. And, with the Covid-19 variants spreading, the threat of new restrictions remains a possibility.

That uncertain outlook has at least two Canadian carriers hedging their passenger recovery bets. Air Canada and WestJet plan a fleet of dedicated freighters as they emerge from the crisis. The former will introduce its first two Boeing 767 freighters later this year, and the latter its first Boeing 737-800 freighters early in 2022. Both airlines hope to take advantage of what many expect to be a sustained increase in air freight amid a jump in e-commerce and ground shipping bottlenecks.

Edward Russell

Latam Spars With Creditors Over Cancellation of Delta and Qatar Deals

Desperate for cash as global air travel ground to a halt in the early days of the coronavirus pandemic, Latam Airlines Group reached out to two of its largest shareholders, Delta Air Lines and Qatar Airways, in an effort to raise liquidity. The result was the termination of two deals for Airbus A350 jets in exchange for cash in the days leading up to Latam’s U.S. Chapter 11 bankruptcy filing.

At least that’s the narrative presented by Chile-based Latam in a growing disagreement with the unsecured creditors committee in its Chapter 11 proceedings. The committee alleges that, rather than helping Latam, Delta and Qatar deliberately took advantage of the ailing carrier to cut their own costs and exit deals for aircraft they no longer needed amid the grounding of most of the global fleet.

The back-and-forth is the latest high-stakes drama in the restructuring of South America’s largest carrier. Earlier in July, The Air Current reported that Delta has reached a deal with Latam creditor AerCap for several “gently used” A350-900s — potentially the very aircraft that it was due to buy last year. And in May, it emerged that Azul may be preparing to make a bid for Latam’s Brazilian subsidiary — Latam Airlines Brasil — by leveraging its relationships with creditors. All of these moves come as Latam prepares to submit its reorganization plan to the court by September.

Latin America’s second- and third-largest carriers, Avianca and Aeromexico, also are restructuring under Chapter 11 protection in the U.S. However, neither carrier’s proceedings have yet proved as eventful as those at Latam.

At the center of Latam’s dispute with its unsecured creditors are its separate deals with Delta and Qatar. Atlanta-based Delta had agreed to buy four A350-900s from Latam, as well as to assume 10 delivery positions, as part of the strategic alliance the carrier’s unveiled in September 2019. That deal was terminated in exchange for a one-time $62 million payment on May 25, the day before Latam filed for bankruptcy in the U.S.

The creditors allege that Delta did the deal solely to avoid paying pre-crisis prices for the A350s. They estimate that the value of the jets had halved by May 2020 since the deal was finalized in November 2019.

“Delta’s gain was the debtors’ loss, all at the expense of the debtors’ estates,” the creditors said in a June 14 court filing.

The creditors may be overstating the pandemic’s impact on values. The value of a new A350-900 fell by just $10 million to $135 million from the beginning of 2020 to that September, according to Cirium current market value data. A new A350-900 was worth roughly $123 million this March.

Doha-based Qatar was subleasing five A350-900s from Latam when the pandemic hit in March 2020. Latam agreed to end the subleases early in May in exchange for an undisclosed payment, something the creditors allege was “essentially a favor” for one of its largest shareholders.

“Latam flatly rejects any suggestion that it undertook either transaction with the intent of defrauding its creditors,” the airline said in a response to the allegations in a court filing last week.

Both Delta and Qatar filed separate motions with the court objecting to the unsecured creditors’ claims. “This was an arm’s-length business transaction that was consistent with, and in fact markedly better than, the then-other available options for increasing liquidity,” Qatar said in its filing.

The unsecured creditors are seeking authority from the bankruptcy court to pursue a legal suit against Delta and Qatar.

Regardless of the outcome of the dispute, Latam is in the process of exiting its A350 fleet. The airline outlined plans to remove its 10 A350-900s in favor of an all-Boeing widebody fleet in April. Latam flies Boeing 767s, 777s and 787s.

Edward Russell

U.S. Tops 10 Million Flyers over July 4th

U.S. airports screened 10.1 million people over the July 4th weekend from July 1-5, according to Transportation Security Administration data. It was the strongest holiday travel period since the pandemic began and down just 17 percent compared to the same five days in 2019.

The largest U.S. carriers American Airlines, Delta Air Lines and United Airlines carried more than 64 percent of those travelers, or 6.51 million people, individual airline data show. American carried the most travelers with nearly 2.7 million travelers boarding its flights over the five-day holiday period — a three-fold jump from the Covid-hit July 4th holiday in 2020.

Delta carried 2.3 million travelers with the busiest day July 2 when 505,000 people boarded its flights. And United carried 1.51 million travelers on 15,876 departures over the holiday weekend.

“After a challenging year, this weekend proved that people are ready to travel again,” American Chief Operating Officer David Seymour told staff in a memo on July 6 that was shared with Airline Weekly.

Edward Russell

IATA: Slot Flexibility Crucial Until Airlines Stabilize

At the beginning of the pandemic, airlines — particularly in Europe — operated “ghost” or “zombie” flights, empty of passengers and cargo, simply to retain their use-it-or-lose-it slot rights at constrained airports. By last summer, most European governments and airport operators waived those rules, but the decisions were not met with, shall we say, universal acclaim.

Instead, several low-cost-carriers and aspiring new entrants cried foul, arguing that the waivers were tantamount to states picking winners and losers in the battle for a precious commodity. Those valuable slots, they claimed, should be redistributed to airlines that were in a position to use them.

But that characterization is unfair, Rikke Christensen, Virgin Atlantic vice president for networks, alliances, and commercial planning said. Mechanisms were put in place to allow new entrants to start up at constrained airports, she said, pointing to Heathrow as an example. Furthermore, enough organic slot trading has occurred to allay competitive concerns. Christensen chairs IATA slot policy working group.

Had there not been slot waivers, airlines would have continued operating ghost flights, which would have served neither the carriers nor the environment well, she said.

Booking curves remain short, particularly in Europe, and schedules are in flux. Christensen pointed to the example of UK-Portugal bookings, which spiked when pandemic restrictions eased but collapsed when restrictions were quickly put back into place. For this reason, airlines need flexibility with slots. “Slots are what you plan toward,” she said. “But we need more flexibility until restrictions end.”

And restrictions show no sign of ending. Forward bookings in Europe for longhaul international flights are down from last year. For the October-December period this year, bookings are down to 18-25 percent of 2019 levels, down from 30 percent of 2019 levels last year, IATA said. Domestic demand, led by the U.S. and China, is back to 80 percent of 2019, the group’s data find.

Madhu Unnikrishnan

In Other News

  • Korean Air’s acquisition of Asiana passed one of its final milestones, after the Korea Development Bank signed off on the carriers’ integration plan after a three-month-long review. The plan governs the carriers’ plans to merge both the mainline and their low-cost-carrier subsidiaries. Now, Korean is waiting for other regulatory agencies to approve the integration plan. Korean says it is beginning the process of harmonizing the two airlines’ cargo and passenger routes and schedules.
  • A sign that the domestic air travel recovery is real: Regional carrier Mesa reported its June block hours were up 225 percent. Block hours for its American operations were up 320 percent, while its United operation rose 175 percent. Its new freighter business for DHL, which it launched last year, reported 144 departures and 221 block hours in June.
  • The U.S. Transportation Department approved Ravn Alaska‘s name change (from RavnAir Alaska) and approved the carrier’s application to register the trade names Northern Pacific, Northern Pacific Airlines, and Northern Pacific Airways. The carrier has ambitious plans to launch low-cost, longhaul service between Asia and the continental U.S. over a hub in Alaska, news first reported by Ravn announced its network plans, which include possible flights to Tokyo and Osaka, and its efforts to secure ETOPS-certified Boeing 757s for its expansion in a video that has since been removed.
  • IATA maintains expectations that global air travel will recover by 2023, the organization said last week. Domestic markets continue to recover faster than international with China and Russia passenger traffic already above 2019 levels and the U.S. set to recover by year-end. IATA Director General Willie Walsh described the organization’s outlook as “optimistic but cautious” and added that there is still “quite some uncertainty” in the travel recovery, especially with the emergence of new Covid-19 variants and differing vaccination rates around the world.

Edward Russell and Madhu Unnikrishnan

Madhu Unnikrishnan
July 12th, 2021 at 12:01 AM EDT

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