Air Canada posts steep loss in 'darkest period' during pandemic, shares dive

(Reuters) - Air Canada AC.TO on Monday posted a bigger-than-expected quarterly loss, and its shares sank 5% as the carrier warned third-quarter capacity would slump about 75% as people stay home during lockdowns to fight the coronavirus outbreak.

FILE PHOTO: Air Canada signage is pictured at Vancouver's international airport in Richmond, British Columbia, Canada, February 5, 2019. REUTERS/Ben Nelms

Canada’s largest carrier has suspended financial forecasts through 2021 and adopted a government wage subsidy to keep employees on its payroll as it wrestles with economic fallout from the pandemic.

“We’re now living through the darkest period ever in the history of commercial aviation,” Chief Executive Officer Calin Rovinescu told analysts.

Rovinescu said Air Canada is working on a restart plan, although the carrier expects it will take at least three years to recover to 2019 levels.

Shares of the top four U.S. airlines also dropped after billionaire investor Warren Buffet said Berkshire Hathaway BRKa.N offloaded its entire stake in the carriers last month, adding to the sense of crisis.[L4N2CM2CK]

Air Canada said it expects cargo flights to drive revenues during the second quarter even as it forecast an 85%-90% decline in second-quarter capacity.

“We expect that both the overall industry and our airline will be considerably smaller for some time.”

Analyst Doug Taylor at Canaccord Genuity attributed Air Canada’s stock slide “more to the U.S. airlines getting taken down substantially after the news overnight related to Buffet selling all airline positions.”

Montreal-based Air Canada is also accelerating the retirement of 79 older aircraft from its fleet.

Air Canada Chief Financial Officer Mike Rousseau said daily cash burn will improve modestly in the second quarter compared with a net C$22 million a day in March.

Rovinescu declined comment to analysts on the carrier’s planned acquisition of leisure group Transat AT TRZ.TO, which is subject to regulatory approvals.

Reuters reported that some Air Canada shareholders would like to see the deal renegotiated.

The carrier is taking additional steps to prevent the spread of coronavirus: passengers will be subject to an infrared temperature check ahead of boarding, and the carrier will block sales of adjacent economy seats until June 30.

Air Canada reported an adjusted net loss of C$392 million ($277.97 million), or C$1.49 per share, in the first quarter ended March 31, compared with a profit of C$17 million, or 6 Canadian cents per share, a year earlier.

Analysts on average had expected a quarterly loss of C$1.22 per share, according to IBES data from Refinitiv.

Operating revenue fell 16.1% to C$3.72 billion.

Reporting by Allison Lampert in Montreal and Sanjana Shivdas in Bengaluru; Editing by Shinjini Ganguli, Nick Zieminski and David Gregorio