Refunds Reasonable, But Government Equity a "Colossal" Mistake: Air Canada's Rovinescu

Air Canada’s chief executive says he has no problem with providing refunds for customers who had their flights cancelled due to the COVID-19 pandemic. But he says any government assistance package that requires such a move would have to be “reasonable.”

Speaking in a lengthy interview with Bloomberg News on Tuesday, Air Canada president and CEO Calin Rovinescu also touched on mandatory quarantines, COVID-19 testing and Air Canada’s balance sheet. He also nixed the idea of the government taking a share of Canadian airlines, saying such moves have been a “colossal failure” almost everywhere in the world.

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The long-time airline executive, who will be stepping down in the new year, said Air Canada had “one of the strongest balance sheets in the global airline industry coming into the pandemic. We never expected this level of a rainy day … but we had relative to our revenues one of the strongest balance sheets around.”

Rovinescu said Air Canada has managed to raise around $6 billion since the start of pandemic “so our balance sheet is in good shape. But of course we’re burnig a tremendous amount of cash as we are in what I would characterize as a state of deep hibernation,” with passenger revenues about 10% of last year.

Ottawa nearly two weeks ago said it wanted to talk with airlines, airports and the Canadian aviation sector about a direct financial aid package. A Transat spokesperson last night told Travel Pulse Canada that discussions haven't even started.

Rovinescu pointed out that other countries of the world have provided between $175 billion and $200 billion (US dollars) to airlines. The Canadian government, on the other hand, has yet to provide airlines with any sector-specific support.

Rovinescu said he’s yet to see the suggested terms but that he hopes the program will be reasonable.

"We know the minister (Minister of Transport Marc Garneau) has made it clear that refunds would be required, and based on the size and scale of the program we have no issue, no quarrel with that at all. We have already refunded about $1.2 billion of refundable fares, and of course there’s been a lot of pressure about the non-refundable fares, and so we would definitely do that assuming that the terms of the support package are adequate and that the terms are appropriate and reasonable.”

Asked about the Canadian government taking a stake in airlines, the Air Canada chief said such concepts have been a “colossal failure” in most parts of the world and that “we’re certainly not advocating for it.”

Rovinescu said Air Canada has more staying power than most airlines and that they can sustain the business for “some time.” But he said the question is “what shape will be in when we go through it.”

“We had an amazing run and were servicing almost 220 destinations around world. Obviously, our network is suffering, our fleet is suffering, our aircraft orders are suffering.

“We’re an essential infrastructure for the country and connecting the country to global markets. That’s why it’s so important for the government to act responsibly when it comes to our sector and at least make us in a position where we can compete with some of the leading carriers of the world we were competing with before this.”

Rovinescu said Air Canada for some time has argued for more “science-based measures” to be used when looking at travel restrictions.

He noted that Air Canada stopped flying to China on January 29 of this year, well ahead of Ottawa declaring a pandemic, “because we didn’t like what we were seeing.”

“There was lots of confusion and uncertainty in the early days. We’re totally at peace with that.” But nine months has elapsed since those early days, and the landscape has changed.

Rovinescu said airlines face five levels of travel restrictions:

- “A blanket prohibition on international travellers, unless you have a visa or particular circumstance,”

- “Complete border closure with the United States,”

- “The 14-day quarantine for all returning Canadians or travellers who are able to gain access to the country, and the 14-day quarantine I would say is the highlight of the problem.

- “We of course have an Atlantic bubble that prohibits even Canadians from access the Atlantic provinces,”

- “And finally, if that was not adequate, we have an overriding travel advisory against nonessential travel, which had the effect of nullifying insurance polices for those who did want to travel.”

“So, that combination, while it may have been appropriate on March 14, I’d suggest that on November 17 needs to have sort of different shades of grey. There are a lot of new initiatives that have come up on the testing front and testing to some degree is the silver bullet here.”

Rovinescu said the testing pilot program at Toronto Pearson Airport is a key issue.

“The results are showing there is an overwhelming alternative to the 14-day quarantine,” he said. “Over 99% of the passengers who have arrived at Pearson under this study by McMaster University, over 99% of passengers who arrived tested negative on day one. Of the less than one per cent that tested positive, 70 % of that one per cent are negative on day seven and the rest are negative on day 14.

"It shows we are keeping a tremendous number of people subject to a full quarantine when the science simply doesn’t justify it.”