Good morning, ladies and gentlemen, and welcome to the Air Canada First Quarter 2021 Conference Call. I would now like to turn the meeting over to Kathleen Murphy. Please go ahead, Ms. Murphy.
Thank you, Mo. Good morning, everyone, and thank you for joining us on our Q1 call. With me this morning are Michael Russo, our President and Chief Executive Officer Amos Kazantz, our Executive Vice President and Chief Financial Officer Youssikir Metz, our Executive Vice President and Chief Commercial Officer and Craig Laundry, our Executive Vice President of Operations. On today's call, Mike will begin by providing an overview of the quarter and the impact of the COVID-nineteen pandemic and government imposed travel restrictions and our positioning for recovery. Lucie will touch on travel demand, cargo and loyalty, and Ingrid will provide you with additional details on our cost, liquidity This call also includes references to non GAAP measures.
Please refer to our Q1 press release and MD and A for important assumptions and cautionary statements relating to forward looking information for reconciliations of non GAAP measures to GAAP results. I will now turn it over to Mike.
Great. Thank you, Kathy, and good morning to everyone. Thank you for joining us on our Q1 call. It's a pleasure to speak to everyone today. Although this is my first call as President and Chief Executive Officer of Air Canada, I know all of you very well.
Along with Amos and the entire management team, I look forward to continuing and further developing the transparent and positive relationship we have. Also, I look forward to our next Investor Day, hopefully before the end of 2021, when we can better showcase both the actions we've already taken and the plans we will be implementing to further strengthen our company and our brand. As all of you know, we have built a resilient airline with a goal of being sustainably profitable over the long term. That resilience is enabling us to rebuild our company and serves as a foundation to realize our ambition to remain a leading global carrier And rise higher than ever in the post pandemic world. All of us have witnessed the strength and evolution of our culture, which has been exceedingly tested and is carrying us through the crisis.
Our employees have shown unbelievable resourcefulness, I thank them for their professionalism and all the challenges they continue to brilliantly overcome. I assure them, the analyst community, as well as our investors and other stakeholders that brighter skies are ahead for us in the near future. At present, however, as with all carriers in Canada, the pandemic continues to weigh heavily on Air Canada results. We reported 1st quarter negative EBITDA of $763,000,000 compared to $71,000,000 in the same quarter last year. For comparison, you may recall that last year COVID did not impact the entire quarter.
The pandemic only had a minimal impact in February That became more pronounced in March before making the sell fully felt in April of 2020. On a GAAP basis, we recorded an operating loss of $1,040,000,000 in the Q1 of 2021. In the quarter, net cash burn amounted to $1,274,000,000 or approximately $14,000,000 per day on average, Lower than previously projected. Net cash burn progressively improved throughout the quarter, although Given the ongoing impact of the pandemic on travel demand, including advanced ticket sales. We had almost $6,600,000,000 in liquidity at the end of March.
Subsequent to this, in April, we finalized the financial package with the Government of Canada, Primarily comprised of fully repayable loans, which provides access of up to $5,900,000,000 in additional liquidity if required. Beyond serving as a layer of insurance, the government package also enabled us to better resolve customer refunds for non refundable tickets. The refund process with customers is going very well and we are doing regular outreach to ensure everyone has the necessary information to request a refund. For our customers, safety is our top priority. We were therefore very pleased with our COVID-nineteen CleanCare Plus Great levels of biosecurity across multiple passenger touch points.
The certification aims to create a global standard for health and safety Our next question comes from the line of our employees as well. We have launched a number of workplace testing and tracing initiatives. We partnered with Bombardier ADMs, which is the Montreal airport and Byron Group Centre To open 2 vaccination clinics for our Quebec based employees and their immediate family members near our Montreal headquarters. And most recently, we announced that we are partnering with the Ontario government and the region of Peel to open a clinic facilitating vaccinations later this month In a further sign of our ongoing commitment to employees, we were also named 1 of Montreal's top employer for the 8th time and one of Canada's best diversity employers for the 6th consecutive year. This shows that despite the severe disruption of the pandemic, we are Our strong employee culture because a collaborative, diverse and inclusive culture is not only right, It is also essential to our recovery and future success.
We continue to pursue various revenue opportunities. Air Canada Cargo has now completed more than 7,500 all cargo flights since March of last year And over 2,000 this quarter alone, we are building our transformed aeroplan program and Lucie will touch on both of these later on the call. We know ESG is becoming a prime consideration and differentiator of companies. To then Sustainability, we are committing to a very ambitious climate action plan and aiming for a target of net zero greenhouse gas emissions by 2,050, which will also support Canada's leadership position on climate change. Underneath our mission reductions plans is renewal of our narrow body fleet.
To this end, we took delivery of the 2 20 aircraft in the Q1. The A220 is highly fuel efficient, It is also extremely popular Customers offering unmatched comfort for an aircraft of this size. Our investment in the A220 is also an example of our strategic approach going forward. We intend to remain diligent on costs, yet also plan to take smart risks and make strategic investments to position us for the opportunities we see ahead. In this way, we will build upon our numerous competitive advantages we already have, including a widely recognized and powerful brand, We are poised to emerge strongly from the pandemic and compete successfully with the best in the world.
With that, I'll turn it over to Lucy.
Thank you, Mike, and good morning, everyone. To start, I would also like to acknowledge the dedication and resilience of our teams across the airline. We've been tested in ways never imagined, and our culture and commitment to our customers have been on display throughout the pandemic. Our people embody our core values and continue to represent the very best of Air Canada. Passenger demand in the Q1 was significantly impacted by the introduction of new layers of travel restrictions.
These include requiring all In Canada, since the pandemic began, coinciding with the announcement of this new set of restrictions in the quarter, We agreed to immediately suspend all flights
to fund destinations at the request of
and to support the Government of Canada and its efforts to curb the spread of COVID-nineteen. Combined effects of the additional travel restriction, The cancellation of Sunshine, the resurgence of COVID cases in Canada and around Europe and the emergence of variants of the virus around the world resulted in an 88% decrease in 1st quarter passenger revenue compared to the Q1 of 2020. We operated 82% less capacity than the Q1 of 2020 and 84% less when compared to the Q1 of 2019. Looking to the Q2, we plan to operate approximately twice the capacity we operated in the same quarter of 2020. This represents a decrease of 84% compared to the Q2 of 2019.
As we've done Looking ahead, we are optimistic about the continued vaccine rollout in Canada and around the world, the guidance supporting vaccinated travel from health agencies, including the CDC We're confident that the domestic market will lead our recovery, and we have seen relative demand strength in Canada despite interprovincial restrictions and lockdown measures. Specifically, domestic transcontinental long haul markets continue to show the greatest strength, followed by gains in key Intra West markets. Once a critical mass of Canadians is vaccinated and the number of COVID cases begin to flatten, which the government's modeling predicts Could be this summer, we anticipate restrictions and lockdown measures will begin to be lifted. We expect this will result in an increase of domestic travel demand. We, of course, monitor demand trends very closely in other markets, and we believe Canada will observe similar travel patterns as those observed in the U.
S. Looking internationally, our transatlantic services have been our strongest performing market outside of Canada, led predominantly by resilient visiting friends and family, or VFR, traffic as well as U. S. Traffic connecting to leisure destinations in Europe. We expect these segments to continue to show strength as the health situation improves globally, vaccinated travel becomes more widely accepted and restrictions continue to ease.
We continue to seize VFR market opportunities, leveraging strong community and cultural ties between These include markets that we have traditionally served, such as France, the UAE and Morocco, as well as new countries added to our network such as Qatar and India. Although these markets have been negatively impacted by the mandatory hotel quarantine in Canada, Early indications are that demand remains resilient throughout the summer. Our new non stop service from Toronto to Doha in partnership with Qatar Airways Our new nonstop service to Cairo from Montreal launching in June will be supported by the gradual rebuild of our transborder network as we have seen strength in the U. S. Similar to our strategy with Doaa, we will look to capture markets beyond Cairo through our co chair partnership with Egypt Air.
Our network diversity has been on full display over the course of the pandemic and through a concerted effort has been one of our competitive advantages. Our ability to tap into U. S. Transit traffic illustrates this and will help accelerate our recovery in the short and medium term. In late April, we suspended our services to India following the government of Canada's balance flights from the country until at least May 23.
We plan on resuming service as soon as it is safe, and we are committed to do so. Of course, India remains an important and strategic market for us. Looking further ahead, we are seeing strong major demand in the sun markets through the winter as Canadians begin to eagerly anticipate their first holiday since the onset of the pandemic. Demand from Canada is especially strong to Mexico, the Dominican Republic, Hawaii and Florida. Now as part of the government financial package, we've made several commitments, including customer refunds and reinstating service to regional communities.
Even before this package was finalized, we had already refunded more than $1,200,000,000 to eligible customers. In line with our commitment to government and our customers, in late April, we began offering eligible customers to purchase nonrefundable fares the option of a refund To support our travel agency partners who have also been significantly impacted by this crisis, we are not recalling AT and T sales commission for a refunded ticket. In addition, we have revised our booking policies for all future travel with more options for customers when a flight is canceled or rescheduled. This policy change will provide certainty and flexibility so customers can book their future travel with greater confidence. We're also progressing on our commitment to reinstate access to regional communities where service was suspended due to COVID-nineteen pandemic either directly through our network or new interline agreements with 3rd party carriers.
Looking to Aeroplan's performance in the Q1, Member engagement and activity continued to show resiliency. Unsurprisingly, total points sold remained down year over year, driven primarily by reduced points issued on Air and Hotel Partnership. Co brand credit card spend continues to show upside from the 2020 lows And with approximately 80% of last year's level for the Q1 of 2021. However, card spend performance has not improved from Q4 2020 As the most recent wave of COVID-nineteen lockdown has stunted the recent spend recovery trend, cardholders remain engaged overall with card retention rates When we designed the program, our members told us they wanted more opportunities to earn and redeem points in their everyday lives. In March, we announced a first of a kind partnership with Starbucks Canada, allowing members to earn and redeem Aeroplan points while enjoying your favorite Starbucks Beverages and Snacks.
This new partnership is another example of our commitment to rewarding all travelers, both frequent and occasional, and it has been very well received with the number of members linking their Aeroplan and Starbucks account and outperforming our launch target. While we remain highly selective in who we add to our partner roster, we are actively engaged in conversation to bring more opportunities for our members to engage with the program. As Aeroplan's relaunched in November, we are seeing strong customer take up of our pointcash combination payment options as well as rent fare upsell. These are 2 new features available when redeeming for site rewards Finally, as part of our ongoing commitment to deliver value and flexibility to our most loyal members, we announced that we are automatically extending Aeroplan Elite status These changes are some of the many ways we're demonstrating our commitment to welcoming our members back on board. Early in the pandemic, we were quick to Our cargo revenue of $281,000,000 in the first quarter represented an increase of $132,000,000 or 89% Compared to the same quarter in 2020 and an increase of 59% versus the same quarter in 2019.
By the end of 2021, we plan to have 2 Boeing 767 freighters operating on international cargo routes. The freighters represent an opportunity to continue building on the success of our cargo only flight and are an important part of our recovery and long term growth. Freighter operations will complement our passenger network and provide long term stability and growth for our largest cargo customers, including freight forwarders, We will optimize our capacity en route using a combination of freighter aircraft, Our reconfirmed cabin loaded aircraft and the belly space in our passenger network. In March, we launched our e commerce platform, Weibo. This program in cooperation with local retailers takes advantage of our domestic passenger network, facilitating the end to end distribution of e commerce goods across Canada and offers logistics and delivery solutions for online retailers that are simply faster and easier to use than what is available to Canadian online shoppers today.
This is exciting for us and illustrates our ability to innovate while also leveraging our existing assets to capture unique revenue opportunities. Our simplified, modern and efficient fleet is well structured to capture network opportunities once we begin to gradually rebuild. Our Boeing 787 aircraft remains the cornerstone of our international fleet, serving the hub to hub routes in select core markets that make up our current skeleton network. Within North America, we continue to take deliveries of the Airbus 220 and welcome more of our Boeing 737 MAX fleet back into service. These aircraft represent the backbone of our fleet and will enable the redevelopment of our network, effectively serving domestic, Throughout the pandemic, we've demonstrated industry leadership in developing our CleanCare Plus program and have undertaken several medical collaborations to continue Advancing biosafety across the customer journey and our business.
This enhanced focus on health and biosafety is going to remain a core component of our customer experience and our efforts throughout the pandemic positions us at the forefront of the industry. In addition, investments we made in technology prior to the pandemic, including our new Our product and our customer experience as well as our ability to see unique revenue opportunities through Aeroplan, Cargo in a new market, we are primed for recovery, and all of us at Air Canada look forward to welcoming our customers back on board. With that, I will pass it on to Dean.
Thank you, Lucy, and good morning, everyone. I would also like to echo Mike and Lucy's comments And thank our employees for their dedication and hard work during these extremely challenging times. I'll start by touching on our costs. Operating expenses were well controlled in the quarter. On a capacity reduction of 82%, operating expense The COVID-nineteen pandemic and the significant progress being made on managing variable costs and reducing fixed expenses.
You may recall that we completed a cost reduction and capital reduction and deferral program in 2020 as part of our COVID-nineteen mitigation and recovery An example of this was the recent revisions to our capacity purchase agreement with Jazz. This revised agreement is expected to deliver $400,000,000 in cost reductions over 15 years. As a part of the revised agreement, the operations of the Embraer AIR 175 aircraft are transformed to Jazz and Jazz becomes the exclusive Air Canada Express operator, allowing us to achieve operational efficiencies and reduce operating costs and cash burn. Furthermore, Chorus will remove all 19 Dash eight-three hundred aircraft from the Jans fleet by the end of this year, which will contribute to reducing operating costs. Turning to certain major expense categories in the quarter, beginning with wages and salaries and benefits, they declined $268,000,000 Or 34% in the Q1 on a lower level of employees following the major management and frontline workforce reductions affected in 2020.
Aircraft maintenance expense decreased $120,000,000 or 44% from the Q1 of 2020 On a lower volume of maintenance activity due to reduced flying year over year and retirement of certain older aircraft from the fleet, A decrease in maintenance provisions resulting from the updated end of lease cost estimates in anticipation of returning aircraft to lessors was also a factor. We recorded special items amounting to a net operating expense reduction of $127,000,000 This included a net benefit of $163,000,000 related to the Canada Emergency Wage Subsidy or CUES program, which has supported the airline retaining a workforce in excess of capacity levels. We plan to continue to participate in this program, which is expected to be extended to September 2021, subject to meeting eligibility requirements. Special items also included an impairment charge of $20,000,000 pertaining to the ongoing adjustments related to the fleet retirement program as well as the $12,500,000 fee related to the termination of Air Canada's arrangement agreement with Transact. Turning to liquidity.
In the Q1 of 2021, we continue to take actions to support our liquidity position. In January, we announced the partial exercise of an overallotment option in connection with an offering of Air Canada shares completed in December. This resulted in net proceeds of $60,000,000 In March, we concluded a committed secured facility totaling $475,000,000 to finance the purchase of the remaining 15 Airbus A220 aircraft scheduled for delivery in 2021 2022. We also extended our US600 $1,000,000 and CAD200 $1,000,000 revolving credit facilities by 1 year to April 2024 and December 2023, respectively. At the end of March, unrestricted liquidity amounted to nearly 6,600,000,000 In April, we substantially increased our available liquidity through a series of debt and equity financing agreements with the Government of Canada.
In addition to the gross proceeds of $500,000,000 from an equity investment, the financial package allows us to access up to $5,400,000,000 in debt financing Through fully repayable loans that we would draw down if and as required comprised of a 5 year In the form of 3 non revolving credit facilities of $825,000,000 each maturing in April 2026, April 2027 April 2028, respectively, and a 7 year $1,400,000,000 unsecured credit facility for refunds of non refundable tickets. Note that the refunds will generally be cash neutral to Air Canada's liquidity position. Our unencumbered asset pool amounted approximately $1,700,000,000 at the end of the quarter. This pool excludes the value of Aeroplan, Air Canada Vacations and Air Canada Cargo. As part of our ongoing efforts to maintain adequate liquidity levels, Additional financing arrangements continue to be assessed and may be pursued.
Moving on to cash burn. In the Q1 of 2021, Our net cash burn was $1,274,000,000 or approximately $14,000,000 per day on average, lower than what was previously anticipated. This included $2,000,000 per day in net capital expenditures and $4,000,000 per day in lease and debt service costs. The improvement in net cash burn from what we previously projected was attributable to a combination of higher than anticipated operating earnings, Favorable timing on working capital and the deferred settlement of aircraft lease returns. Looking ahead at the second quarter, We estimate net cash burn of between $13,000,000 to $15,000,000 per day on average.
This net cash burn projection includes $2,000,000 per capital expenditures, net of financing and $5,000,000 per day in lease and debt service costs. Compared to the Q1, Q2 2021 includes approximately $1,000,000 per day in higher scheduled debt principal repayments, An increase in end of lease payments due to the more aircraft being returned to lessors and reflects the continuing impact of the pandemic on travel demand. Given the ongoing impact of the pandemic on earnings and advanced ticket sales, we don't expect net cash burn For the Q2, our net cash per projection excludes the amount of expected eligible refunds of non refundable fares being processed Pursuant to the change in the refund policy we announced on April 12, we estimate that the maximum exposure to cash refunds Certain customers will choose to retain their travel voucher. Lastly, turning to pensions. The aggregate solvency surplus in our Canadian defined pension plans was $3,000,000,000 at the beginning of this year, an increase of 400,000,000 I would like to offer once again a heartfelt thank you to our employees for their unwavering efforts.
I am confident that better times are ahead of us. I would also like to acknowledge the upcoming retirement of Kathy Murphy, We'll be leaving us at the end of this month after 39 years of loyal and dedicated service. I know that many of you have had the pleasure of working with Kathy over the last several years. Please join us in wishing her the best in her retirement. I will now turn it over to Mike.
Thank you, Amos. As you heard today and have seen in our response to COVID-nineteen throughout the Last year, Air Canada is effectively managing through the pandemic. We are doing this not only from a defensive perspective, Measures we took long before COVID's onset. We spent a decade creating a resilient airline with a strong can do culture. This included accumulating a large liquidity cushion in case of a prolonged business disruption.
As well, we acted very quickly early in the pandemic. We took difficult and decisive actions to cut costs and reduce our network. For those who continue to fly, we put in place effective biosafety measures, moving well ahead of government on such things as the requirement for passengers to wear masks and for pre flight temperature checks. We initiated 3rd party research with McMaster Health Labs and the GTAA To find the most effective use of testing and quarantine to limit COVID spread. And we have partnered with scientific organizations such as Cleveland Clinic And with the industry through the Creative Destruction Labs to share and apply the most current scientific knowledge.
We understand and acknowledge that Canada is in the middle of a very difficult 3rd wave. However, there is cautious optimism It is time to develop and communicate a reopening plan for international travel to and from Canada. After over 14 months of restrictions, Canadians who we know are eager to travel want and deserve clear guidelines. They want to know when they will be able to travel internationally again and under what protocols. They are seeing other countries With others, I've been consulting regularly with the federal government as well as export advisory panels here and worldwide to provide recommendations and advice on how to safely open up travel.
For example, the current mandatory hotel quarantine for arrivals has Proven ineffective. It should be eliminated. In addition, based on the experience of public health authorities in most G7 countries, We believe that with a vaccination program now underway nationally, a modified and more relevant approach to testing and quarantine We'll keep Canadians safe while allowing our country to reopen for international travel. Apart from our company's needs or satisfying the The first question comes from the line of the line of the line of the line of the line of the line of the line of the line of the line of the line of the line of the line of A multicultural trading nation like Canada needs a healthy aviation sector. Prior to COVID-nineteen, Air Canada by itself Plus another 190,000 jobs indirectly in the critical aerospace sector.
For all of these reasons we just spoke about, Canada needs to develop and communicate an international travel reopening plan. Air Canada working with many travel partners will continue to provide relevant input and push for these next steps as we safely emerge from the pandemic. Thank you. And we are now ready for questions.
Thank you. We will now take questions from the telephone lines. There will be a brief pause while participants register for questions. We thank you for your patience. Our first question is from Cameron Doerksen from National Bank Financial.
Please go ahead.
Thanks very much and good morning and congratulations Kathy on your retirement. I just had a question about the, I guess, the Cash refunds. And I'm wondering if you can maybe just talk a little bit about, I guess, the take up so far, what you've seen As far as people asking for cash or for sticking with their vouchers or you've also had a fairly attractive, I guess, Aeroplan option as well. So what's been the what have you seen so far as far as the actual cash refunds?
Good morning, Cameron and Seamus. Thanks for dialing in. So we're actually a bit surprised. The take up has been much We're continuing to actively reach out to customers proactively, reminding them that they have tickets that are eligible for refunds. I've been working with the trades, working with the travel agency communities and the like.
So we continue to push, but we're sort of surprised again It's a slow take up on that.
Okay. That's helpful. And just secondly for me, I just wonder if you can You discussed a little bit what you're seeing for bookings maybe later in the year, when I think most people would sort of assume That they might be able to travel internationally again. Are you seeing any significant increases there As far as interest, I guess, later in this year or maybe even into the early part of 2022?
Yes, hi. It's Lucie. We definitely are. In fact, I'll separate perhaps Q4, Q1 from what we're observing in Q3, but certainly for the 4th Q1 of 2022, We're definitely seeing a strong base for bookings to fund destinations, so the Caribbean, Hawaii, Florida, Italy. So definitely, we're seeing customers assuming that by the time we Q4, the Q1, that the travel restrictions will be somewhat eased.
And so definitely, we're seeing a good appetite there for bookings. And in looking at the Q3, as you know, much of our efforts as we move forward is in the DSR and Seize Your Space. So we are seeing some good uptake for Our international markets in the summer peak and also a good base And very encouraging advanced bookings as it pertains to our 6 Freedom traffic, so traffic originating out of the U. S. So definitely, as we look further down, the signs are positive.
Great. I appreciate it. Thanks very much.
Thank you. Our following question is from Hunter Keay from Wolfe Research. Please go ahead.
Good morning. Lucy, can you
I appreciate the comparison you made to your expectation that demand will pick up like it did in the U. S. Once vaccines roll out. But how does the seasonal Difference in the timing of that factor into that comment, like if restrictions ease as people are going back to school, for example, does that just push out That demand recovery, even though the trajectory might be the same, does it push out the timing of it maybe into the early part of next year, If that vaccine progress occurs later in the summer going into the fall.
I think the first It's an interesting comment because obviously, we observe trends in other markets to inform us as well as In terms of what can happen in Canada with some of the restrictions eased, there's no doubt that our view is the summer peak as we know it will probably push out a little bit Into September October, traditionally July August obviously are peak months, but we do Assume that some of that will push out a little bit into September October. And then with respect to Corporate travel, which is obviously one area that we're watching very, very closely, that I think will be Probably something that we'll start to see in Q3 late Q3 with the Labor Day, We don't believe that we'll see any of that in the closer term. But there's no doubt from a seasonal point of view, we'll be well poised to Captured the strong leisure demand in the Q4 for the Sun Groups. Certainly, Europe for sure will push into September, October in
I got you. And then on that point, my follow-up is, is there any data points you can share with us, Lucy, on corporate? Obviously, at this We're all just talking about intentions to travel. But can you give us any data points that you've quantified through survey work or the like around how you expect corporate to spool up? Thank you.
Corporate? Yes. So basically, we see some SME demand in the current environment, Our assumption is really that the corporate demand will most likely return in the September time frame, post Labor Day. And obviously, it will be largest for us in the domestic sector, but basically, our assumption is it will be in the
And Lucy, that's based on and Hunter, that's based on constant discussions with our largest corporate customers, which We're constantly in contact with.
Okay. Thank you both.
Thank you. Our following question is from Savi Syth from Raymond James. Please go ahead.
Hey, good morning, everyone. I'm just curious As summer demand comes back and if it's strong and the restrictions are lifted, how much could you kind of ramp your capacity
I think, Savi, it's Mike. I'll start with that. So we're spending a lot of time running different scenarios as to bringing Back aircraft and bringing back people to and again to Lucie's earlier comment, we are certainly monitoring other markets. U. S.
Is obviously ahead of us As to how fast emplacements moved up over the last couple of months. And so we are prepared certainly to deal with that type of step function in capacity increases in a fairly short order. We've kept all our pilots recent and with With rotation and they're still on staff, we're certainly keeping all our planes fully operational, although some of them are parked the desert as most airlines have, but we're certainly ready to add capacity fairly quickly. And also Savi, to a large degree, we're also spending a lot of time with our partners, airports, Government agencies to ensure that they can also step up to capacity to ensure that we provide The best possible customer experience for that returning customer.
So I mean theoretically, you could get back 100% if that was necessary or is there kind of an upper limit
on the call center? I don't think so. It depends what time frame,
but I think it's going to take us a little longer to get back to 100 We'd love to have that challenge. But we don't think based on trends in other countries Like U. S. Obviously, which is watching closely, we don't see that happening.
And then if I might for a second question. Just If you look a little bit medium to longer term and kind of going off a little bit on the Hunter's question on business, but if you look at your fleet retirements and then kind of the The integration of the new aircraft coming in and perhaps some of the cost enhancements that you've done, like how much of a loss of the premium traffic Can your can the business model handle and still generate those margins that you were heading towards kind of pre crisis? And I'm guessing this is more mostly kind of premium business demand that might be lost in terms of the number of trips people take.
Yes. No, it's a fascinating question. It's something we've been talking about internally
quite a bit.
And again, I'm not going to debate whether all business traffic comes back over a period of time and versus X percent. There are a number of studies out there that indicate a range of numbers basically. But we're reasonable. Certainly, we've downsized our And so that does take into consideration that there'll be less traffic overall. And as we said before on these calls, We've taken a fairly defensive position on our fleet and we will go search for new planes, whether new or leased To fill gaps if required.
So I think we're well positioned to be flexible on the business side. We do Although, believe business will come back and we are seeing indications in the U. S. And certainly speaking to our corporate customers That there is a pent up demand for business as well, frankly, and that we do see it recovering, maybe certainly a little bit later than VFR, But certainly, we do see strong indications that it will recover. I'll turn it over to Lucie to provide some more color.
Yes. Mike, if I can add, When you look at it from our fleet perspective, we're actually in a better position given the low pass that we have. So if you The size of our cabins, not only just on the narrow body fleet, but on our wide body fleet, we actually Have the best low budget to be able to deal with the fact that this demand might take a little bit longer to recover. In In years past, if we go back to 2018, 2019 and the peak of the strength, we were actually looking at scenarios where Perhaps we would need to relook at our Lopez and the premium cabins on our widebody airplanes. So the fact that we are sitting with the fleet we are now Looking at what's ahead for us, we're actually in a pretty good position.
And needless to say, in some of these VFR markets that we talk about, There is opportunity as well for premium traffic for leisure demand and things that we haven't really Focused on in the past that we are certainly going to focus on in the future. So there may be a different mix, but certainly the locals we have, We're actually in a very good position and that's in both narrow body and wide body fleet.
That's a good point. Thank you.
Thank you. The following question is from Chris Murray from ATB Capital Markets. Please go ahead.
Thanks, folks. And Kathy, let me echo my congratulations on your retirement. I guess moving Just thinking about the tourism and leisure business, now that the Transat transaction is gone, When you think about Rouge when it was originally created, there was a lot of thoughts around creating a standalone dedicated Travel arm, but you've also pulled down a lot of capacity there. How do we think about the future of Rouge With Transat probably still as a competitor and how do you integrate that with the rest of the company?
Well, certainly, there's definitely a future for Roosh here. As it stands, our plans are On the narrow body fleet, so basically for the leisure markets to reinstate service in September. And of course, the fact that we retired or that we, I should say, moved the 767s to cargo, we don't have the 767s planned for Rouge on the international market, but there are definitely in the current network and certainly when we look at the future the type of traffic that we're going to Look to capture, there's definitely an opportunity for Rouxian and it's fully our intention to keep it as part of our mix.
Yes. And Chris, just to add to that, again, the focus will be on the narrow body into the Caribbean and some markets, but we will also continue to Move passengers through major hubs in Europe and working with our partners as well. And so We think we can capture both those customer elements without the 67 program in place.
Okay. This is maybe a little bit of a longer term question, but looking at your CapEx forecast, it's kind of interesting to see 24, 25, it's essentially maintenance capital is that. But going back and thinking about fleet and where you may want to go, I think about I was looking at the traffic data from around SARS back in 2002, 2003 and 2004. And The capacity came back really, really fast with the demand. So how do we think about Your ability or your thought process around adding additional capacity, and I'm thinking about this from Maybe having the reset and the thoughts around free cash flow and the balance on what you can do with the existing fleet and What would be some of the indicators that we should be thinking about before you want to start adding additional aircraft?
Well,
another very interesting question on long term planning. Like I said before, I think we've got We have we're basically through our re fleeting program, both for wide bodies and narrow bodies. We're not that far away from getting the 220s in place and MAX in place, and we will have an unbelievably efficient fleet to exit the pandemic. We have options available on MAX and on 220s. We have and certainly we can go source planes once we See indicators of growth beyond our expectations.
I mean our current fleet Yes, it does have certainly have the ability to cover the majority of the ASMs. We moved in 2019. As you saw probably from the fleet table, Chris, that we will probably keep our 319s a little bit longer than we expect. That's kind of our swing Fleet as well that provides us again additional flexibility because most of those planes are owned. And so we can continue with those For several years and take advantage of capacity growing faster than what we've anticipated, which again, like I said earlier, would be a very nice problem to have.
So I think we've done a pretty good job covering ourselves for growth beyond our expectations, Certainly, also for even further fine tuning and potentially getting rid of the 319s if the market doesn't come back as As we wanted to. That gives us the opportunity, Chris, to then step into potentially new types of aircraft Like the 321 LRs, for example, that we like that have certainly have a potentially have a place In Air Canada's fleet, as we go forward. So I think positioning for that flexibility was critical from our perspective And it gives us a little bit of time to look carefully as to what plane type best fits the evolving business model That we'll experience over the next couple of years.
Okay. Just maybe a quick update. If we were thinking about kind of getting back to, Call it 80% to 90% of 2019 levels. What should we be thinking about as maintenance CapEx for the company?
I think maintenance CapEx and this would include everything non aircraft. Let's start with non aircraft, $500,000,000 $600,000,000 a year. A lot of that to do with technology. We certainly see technology as a critical enabler in improving our customer experience as we go forward and our efficiencies as we go forward. And then from a plane perspective, assuming growth of a couple of percent or improvements in ESG Another $500,000,000 $600,000,000 on top of that basically, either through leased or through acquisition.
All right. That's helpful. Thanks, folks.
Thank you. Our following question is from Tim James from TD Securities. Please go ahead.
Thank you and good morning. I just want to ask a question regarding and Mike, your commentary on sort of Hopes, I guess, for government communication, I think, were quite interesting. And I'm just wondering, have you got any sense from The government on what level of new cases, what vaccination percentage, hospital capacity or any other factors Would allow for changes to travel restrictions or are you kind of literally going to show up one day and find out they're about to change or can you kind of Look out, make your own projections on some of these factors and then say, okay, we think we're going to get to this point At this time and therefore here is when we kind of start ramping.
The short answer to that is we don't have a direct sign from the Canadian government as to what triggers a reopening. I think you've in the media recently some indications of vaccination levels, for example, being critical obviously. And our discussions with Canadian government are obviously just exploring that situation, But also making sure that we can communicate well before that to customers Those restrictions are coming off basically, so customers can book and we can call back employees and we can bring back aircrafts. So we're ready For that type of situation. And we look to other countries, like for example, the UK Issued a reopening plan back in mid April, which has a number of dates, which could move depending on The situation depending on a 3rd wave or increases in caseloads, But we're advocating with our Canadian government that's something that we should look at to provide clarity as we go forward basically.
We saw we just saw it recently with Saskatchewan that provided some step process. And although that doesn't deal directly with travel, I think that's a good first step from our perspective. And so we are spending along With other key travel partners, a fair amount of time with the Canadian government and having positive discussions on that topic and how to move forward. Okay. Thank you.
My next question is around pricing, maybe for Lucy here. I guess, how are you thinking about The pricing decision going forward as demand comes back. And I'm thinking about how desperate some people may be to travel and Willing to pay virtually any fare versus the need for stimulating some confidence in maybe other travelers with lower fares?
Hi. It's the magical question, but there's a couple of things here. There is no doubt that as we start our recovery here, the general Elements that we work with, for example, how we have potential to yield up based on load factors, that kind of thing, Those
this is a
little bit more difficult in this kind of environment. From a pricing standpoint, You're right. In some markets, we will definitely see a surge in demand where this demand is perhaps less price sensitive. And we will definitely do what we need to do there to hold the pricing. But in the leisure space, we The environment will be far more competitive and also given the fact that the load factors will build over time.
What gives me confidence is that, number 1, we have the right tools to be able to manage that because
A lot
of these flows will come from different points of sales, different countries. So we'll still have really good tools to help us do that, so we can actually manage to the best of our ability. And we also have different levers at our disposal like branded fares, for example, even Some opportunities with the Aeroplan program to be able to hold on to The pricing where we can. So the fact that we have different levers gives me confidence that we're going to be able to manage the different market segments. There's no doubt in this kind of environment that we try to rebuild all carriers, particularly Canadian carriers have a lower load factor You can expect the environment to be competitive, but certainly when there are peak travel periods and we have the ability to yield up, we will absolutely do that.
We will absolutely do that.
Okay. Thank you. And then just my final question, And I'm sure you can't quantify this too specifically, but I'm just wondering if you could characterize your Booking assumption that's embedded in your cash burn guidance for the 2nd quarter, I I don't know whether it's relative to Q1 just directionally or if you expect much of an improvement as the quarter progresses. Just any kind of color you could provide on the booking assumption?
Yes, Tim, it's Amos. Really, it's fairly much the same, not much improvement given the 3rd wave that we've seen here, the additional And certainly when you look at the stoppage of service to India. So all of those play a factor in looking at the cash burn numbers.
Okay. Thank you very much.
Thank you. Our following question is from Fadi Chamoun from BMO Capital Markets. Please go ahead.
Thank you. Good morning. And congrats on Your retirement Kathy and all the best. So a couple of questions. First, how much of capacity can you ramp up Given potentially snapback in demand once restriction are eased, how much capacity can you ramp up quickly The current resources that you have, especially in terms of crews and pilots, and then if you can give us I have an idea of how you manage the bottleneck.
Like how much ahead of time would you need to start recalling and retraining in order to Can I ramp up the demand after that? Okay.
So Fady, it's Mike. Good morning. So let's start with what we currently have in place. As you can see from our financial statements, We're running load factors that are fairly low. So right away, there is a hedge in place On the existing infrastructure that we could increase the load factors without recalling anybody, frankly, at the end of the day or without bringing Back any more planes.
That provides us a cushion to some degree to then manage next step to what it steps up to. As I was saying earlier, we've been closely following how the U. S. Employments have been increasing by 20% over a month or 2 months basically. And certainly within that timeframe, we're very, very comfortable in bringing back people And bringing back planes to satisfy the booking curve that would step up at that point in time.
So again, kind of a 2 step process at a very high level. We have existing capacity right now and then that provides us At a good time to bring back based on the booking curves, people and planes basically. To the earlier question, No way we could probably bring back 100% over that period of time, but certainly we do not expect that to happen. And if the U. S.
Is any example, We can easily bring back capacity in those increments.
Okay. And how do you kind of think about the time, advanced time you need to bring back resources like crews and pilots that you Yes.
I mean, pilots right now, we haven't laid off pilots or furloughed pilots, so they're still on our payroll and being Going through training, basically and rotating. So that is not a constraint from our perspective. Bringing back flight attendants is a Fairly straightforward process. You recall them and you put them through a couple of days of training We acquaint them with the rules. So those are 2 critical roles.
And then of course, as I said earlier, the planes are being well maintained Where they're being parked right now and so bringing them back is not going to be a constraining factor either.
Okay. My second question on the liquidity and capital and the balance sheet side. So you've ended March at 6.5 and You ultimately have this agreement with the government. You've got kind of $500,000,000 of equity and then $1,500,000,000 of flow interest loans kind of immediately. I mean, it looks like with potentially demand starting to We covered a little bit later this year and into 2022.
That should be kind of good liquidity cushion. I just want I guess your thoughts on 2 things. 1 is the kind of financing going forward more towards kind of the debt maturity management And are you comfortable with the kind of split debt of equity that you did with the most recent financing with the Canadian government?
Yes. So Fady, good morning. It's Amos. Yes, we're certainly the government liquidity package provides good liquidity And insurance for us as we go forward, but we'll continue to look at our capital structure from a point of managing the debt maturities and Trying to continue to push those out as the opportunities arise. And then I think as we Continue to look at managing liquidity and balance sheet going forward.
At this point, as we look at any other opportunities, We'll continue to assess and monitor the market. And if there's something that makes sense to step into or to take advantage of That would help the structure, we will do so. Yes.
Fady, certainly our focus will be more on debt. We have stepped into the equity markets a couple of times over the last 12 months. That was a conscious effort to manage our long term balance sheet. But certainly, the debt markets are available to us for future financing if required.
Great. Thank you. That's helpful.
Thank you. The following question is from Karnak Gupta from Scotiabank. Please go ahead.
Thanks and good morning everyone and I echo my congrats for Kathy. So I mean first to begin with perhaps if Ken asked, At this time, if you were to rank your 5 segments in terms of capacity recovery, whenever that happens till later this year, Where would you put them? I heard some destinations and leisure markets being the top, but I guess if you were to look at the segments, how would you rank those, please?
On the 5 different segments, in terms of first to recover, I think certainly domestic is number 1. It really depends on restrictions, but U. S. May be number 2 along with the Sun markets, transatlantic Roughly the same time. I think last is probably Asia.
Okay. That makes sense. Thanks. And then on the Q2 cash burn, so the guidance is kind of steady versus Q1. And I think you guys are calling for debt lease service costs being up as well as I think end of lease payment is also going up in Q2.
However, CapEx seems flat and capacity is going up slightly versus Q1. How should we think about revenue and cost and the rate subsidy? I'm like, do they Do you kind of assume them as relatively steady versus Q1, which is kind of the underlying assumption for flattish cash burn in Q1. And then, do you also assume that the $400,000,000 debt maturity that Due or was due in April that is excluded from the cash flow?
So a couple of points there. Good morning, Konark. Yes, For the most part, it is really steady from what we see here in the Q1 as we don't see much in terms of demand given again the 3rd wave that we're in Canada and the other capacity reductions we've taken into account. So all that sort of is factored in into the cash burn, Same with the CUES subsidy and also essentially more of the same through the Q3. As you know, the CUES program was extended, not yet Fully approved through September, but subject to eligibility requirements, we'll be partaking through that through the quarter.
The debt that we paid back in mid April is excluded from the cash burn. The $400,000,000 unsecured U. S. That we just paid back.
Okay. Thanks. And then I think it's kind of a long picture and it's again kind of beating the dead horse on The long term outlook, which it's very hard to predict, I guess, at this point. But based on what you know, Mike, today. Including the scheduled lifting of restrictions across various markets, be it India or some destinations or U.
S. Transborder, What is your stance on the timing of cash breakeven? I know it's a hard question, but just if you were to pinpoint To a timeframe, where would you put that? And assuming you're excluding lump sum maturities and refunds that will be funded to the government loan?
Listen, Conor, it's a fair question. And we have spent an incredible amount of time just not planning from an operational perspective to bring capacity, but also from a financial perspective. We've done an incredible job taking out costs and lowering that breakeven point as we talked about before. Again, a lot it all depends on the government lifting restrictions and which markets do they open up. Certainly, the U.
S. And transatlantic are very, very important Given our exposure to those markets, if those markets open up towards this summer or later this summer, The breakeven point will happen quicker basically. But I hate to answer your question with a conditional, But it has to be that way frankly is that we do know and certainly We will let the market know once restrictions are open as to when we believe we can breakeven. But It's again depending on how fast market comes back and what are the reductions and restrictions? And we're speaking to the Canadian government all about different protocols for vaccinated passengers versus unvaccinated passengers.
And so there is so many different components involved with this that we factored in. But again, we're comfortable that once restrictions are open And countries are also open up to Canada, which is the other situation that we'll be able To express the market fairly quickly, when we should breakeven.
Yes, that's Fair point, Mike. And just to that point, if I can clarify, if you have any sense as to a lot of people and sort of the younger people between 18 40, They are about to get their first vaccine dose shortly and probably the second dose in September or so. So Like is it fair to expect that like late Q4 timeframe is the first period when you might The beginning of the sort of the recovery in leisure markets at least, be it some destinations or Europe, international or India or
We think we'll see a little bit earlier than that. As Lucy said, I think probably late summer. We're not going to probably get the summer peak this year in July, August. As Lucy said, we're probably going to push to the right a bit. But we will start seeing and again, as you know in this business, advanced bookings are critical.
So as these restrictions get lifted and a plan is put in place by the Canadian government and communicated to Canadians, We will see bookings go up and that will be our first indication of our ability to breakeven And what point we will breakeven, frankly. And so again, as we've said today, Q1 was Q1 and Q2 is not going to be much different, but we've got a lot of work to do in Q2 to work with the Canadian government to ensure that we We can communicate a reopening plan and so that we can start seeing advanced bookings come in and then we can provide
Thank you. Our following question is from Stephen Trent from Citigroup. Please go ahead.
Yes. Good morning, everybody, and thanks for taking my questions. Two quick ones for me. First off, Now that the Transat acquisition is off the table, have you seen sort of any adjustments In competitors' body language.
No. I mean Transat's still shut down For the most part, I don't think they're opening up until a month from now roughly, late June. So We have really not and obviously they're still open for bookings, but we have not seen any change in behavior.
Okay, great. And just one other quick question. I know as part of the agreement with the Canadian government that You'll be servicing some specific routes, but with respect to domestic route openings or closings, Because of the agreement, is there any extra layer of consideration or any sort of approval you might need beyond just Canadian Aviation Regulators for other domestic capacity adjustments?
No, no, Stephen. No, we're fully able to operate Whichever way we feel best that suits our objectives. We did commit to the Canadian government that we would reopen Number of small regional routes, either through interline or direct and we'll put those in place in due course basically, but other than that, there is no other limitation or obligation for us on our operations.
Okay. I appreciate it and congrats to you, Kathy. And Amos, thank you again for your time. Looking forward to Tuesday.
Thank you.
Thank you. The following question is from Kevin Chaney from CIBC. Please go ahead.
Hi, good morning. Thanks for taking my question and congrats Kathy on your retirement and all the best. I personally thank you for all the help through the years here. Maybe Mike, if I could ask A question on corporate customers. I know you don't want to debate how much comes back, if it all comes back.
But I'm interested in knowing maybe how your conversations have evolved over The past 6 to 9 months in terms of conversations we would have had maybe middle of last year in terms of maybe how much Per minute decline in demand, some of your corporate customers might have thought 9 months ago versus maybe what they're thinking Today, as we've been locked at home for the better part of 14 months here in Canada,
in the discussions Corporate Canada, probably one of the biggest indicators for them was How they approached work from home. And many corporations in their Corporate travel policies basically indicated that as long as their employees were working from home, they were really restricted in terms of their ability to travel for purposes of business. What we're seeing now though is There's definitely an appetite for Corporate Canada to return to travel. The biggest deterrent, of course, as we know, and Mike talked about Easing the restrictions, but from a corporate perspective, it's really the quarantine requirement that obviously is the biggest deterrent. But I think based on the indications that we're getting from Corporate Canada, the only thing that may be a little bit different In the future, what we've known in the past is same day travel.
So some are thinking that perhaps this is one area We should expect to see a little bit less of corporate travel, but certainly from an international standpoint, transborder, the intention But basically, it has to come with the easing of restrictions and also, obviously, it has to come with Their own internal policies in terms of work.
This is why Kevin, Air Canada has been a leader in at home testing As well, which we think will is part of the solution as well. I mean, with the rapid testing now being authorized for at home use in Ontario, for example, one of our largest markets, we're using that ourselves for people to come into work, come into our warehouses, come into our distribution centers And it's proving to be very, very effective and more and more companies are stepping into that protocol to try and get and again, this is a we've debated this While on the hybrid office environment as we go forward, but most believe that there will be a hybrid office, the people will come back to work and there'll be Some protocols for some period of time and the rapid testing at home is a very, very inexpensive and an appropriate way to get people back into their offices for some part of the week.
That makes sense and that's helpful color. Maybe just my second question, it feels like the Canadian airline industry and yourselves included obviously have been asking the Canadian government for some time now To kind of, I guess, remove these blanket travel restrictions and replace them with science based testing. I don't get the sense we've made any real Progress there. Interesting to know if you think this is something or are you hearing anything from the government that suggests that They're looking at transitioning these restrictions towards more of a scientific based one? Or does this just come down to And the faster we get vaccinated, these restrictions get eliminated.
Yes. I think there's a couple
of elements to that, I mean, I think there's no doubt the Canadian government is very focused on this. They know how important travel is to the economic environment. Certainly, the 3rd wave has made it more difficult to do anything at this point in time, There is tremendous work being done behind the scenes to prepare. There is an expert panel coming Potentially with some recommendations on borders and quarantines in the next several weeks, which we think will be important as well. So again, there is a fair amount of work being done to prepare.
And all we're saying today is that and we will continue to push For the Canadian government to communicate that plan as we go forward. But I can assure you and assure everyone on the call that there is a fair amount of work being done behind the scenes.
Just on your net zero plan by 2,050, can you remind me, are you evaluating I say sustainable aviation fuels right now or is that something you'll be looking at?
Kevin, I mean, we'll be more transparent with our plan, but again, SAF will be a big piece of the solution to get to net 0 and also 20% by 2,030 as well. So there's we have an interim target as well for emissions. And so technology is a big issue. We're speaking to many companies, including Airbus and Boeing and GE about new technology coming down the pipe. SAF, we're speaking to several companies in Canada and in the U.
S. Market. And we're all speaking to the Canadian government about help and supporting SAS investment. We think that is a critical element going forward. And so those two components are going to be very, very important.
And once we announced Our climate goals back in mid March, our team here were inundated with a number Phone calls from potential partners and has opened up our eyes as to What's potentially available, just not in Canada, but around the world. And so we've been a leader in this area and we'll continue to be a leader in this area. And I think there's some very exciting things that We'll be developed over the next couple of years, both from SAF and from a technology perspective that will certainly allow us to get to our net
Excellent. That's great color. Again, congrats Kathy and have a great weekend everybody.
Thank you. Our following question is from Helane Becker from Cowen. Please go ahead.
Thanks very much, operator. I just have one question with respect to the cargo business. As you think about The future of that, when passenger business sort of gets back up to speed, how are you thinking about cargo At that point in time, I know you've got the 2767s that will be coming in from ATSC later this year after the conversion. But is that going to be a big part of the business going forward? Is there like a new target for that?
Could you maybe put some meat on that phone?
Okay. So hi, Helane. So first, if you look at the sort of the progress here on the cargo front, so from now until year end, of course, we have The 777s and the 330s, which, of course, are enabling us to take on all this freighter only capacity. Then we move to bringing in the 767s and we should have 2 of them converted by year end. And as we ramp up passenger demand, of course, we'll have access to incremental billing space that It's going to come from the restart of some of our network.
In addition to that, we also launched Revolt, the e commerce platform. So as we progress over time, certainly, we're going to continue to explore the opportunities that are open For us here on the cargo front, but certainly as we ramp up the 767 freighters, there's no doubt that over the course of The next few years, cargo will become a more meaningful business for us. Absolutely no doubt.
Great. Thanks very much, Lucy. And actually congratulations to everybody, Kathy on your retirement and Amos and Mike on your first Conference Call as you're in your new respective roles.
Thank you, Helane.
Have a nice weekend.
Thank you. Our following question is from Walter Spracklin from RBC Capital Markets. Please go ahead.
Yes. Echo, all the best to everyone as well. I'd like to go forward again into the future here And go under the premise that vaccines result in a very significant surge In travel, in the early days. And my question is, what can you do in the event that that happens and it And it outpaces the capacity that you have in the timeline that you're able to bring it on. And I know there was Talk on price, and I think, Lucy said though that, that is market dependent on what other what your competitors are doing.
So I'm wondering if there's anything else that you could do. And in one particular area, Could you, for example, and how difficult is it if demand is very high and Your aircraft either to add more seats or take out some business class And replace with premium economy. Just curious as to what else there might be that you could do in the near term to Be able to handle if we do get a surge in leisure driven demand, not business demand, but leisure driven demand.
Yes. Like I said, a nice problem to have. We really can't change the LOPA. It takes a year, year and a half to change the LOPA Of a plane, but what we could do frankly is again, we've got planes sitting in Take the 11 planes we've converted to cargo, all cargo, the 330s and the 777s and convert them back. And that would take a little bit of time, but certainly We could do that fairly quickly.
But again, Walter, we'll certainly see this coming in the bookings. And like I said earlier, it gives us adequate Time to bring back the number of planes and certainly the number of people. And given the fact that we've kept our pilots
Recent
and is an advantage to us as the market comes back.
And Mike, If indeed the business segment as you see it through your forward bookings and industry studies is not coming back, particularly intra Travel and that kind of thing, you could though look at a even though it's a longer period to put into place, Reconfiguring for the new normal. I mean is that a fair
Absolutely Walter. To Lucy's earlier point, we think we're configured fairly nicely for business But taking out a role of business the 3rd role of business class and making that into 4 or 6 economy seats or premium economy, we can do that fairly quickly as well.
And we spoke about The premium cabin is a bit earlier when we talked about the low pop, but we can't forget either that we also have A very good low puff for premium economy as well. So if we were to see some Longer term recovery, let's say, in the international premium markets, we're still very well equipped with the investments we've made from a PY perspective. So from that point of view and even within North America, if you look at the 737s for example, we have the ideal product for us to be able to grow into this business demand And the ability to recover pretty quickly with the diverse fleet that we have. Needless to say, in this environment, we have a multitude of scenarios in terms of what the demand might look like. There's the one obviously That we load into the schedule closer to departure, but we are looking at the future and have many scenarios You know that we share with Craig and his team to make sure that if the demand was to Performed a little bit different than what our initial assumptions were that we would be able to react.
Yes. That's why we can say with confidence To you and others that in virtually every scenario, we think we've got the flexibility to ramp up fairly quickly basically.
And on that note, with the aircraft that you the preferred aircraft that you mentioned that you have your eye In that rebounding environment, is there any risk at all here that your competitors are going The same eye on the same aircraft that prices maybe bid up on those either straight from the OEM Otherwise, and is there anything I know you're in a obviously a more financial constrained capacity, but is there anything that you can do through leveraging your Your relationship with the OEMs right now to kind of ready yourself for that potential opportunity so that you're not left kind of facing with significantly higher equipment costs or lack of availability of new ones.
The quick answer to that is yes. I mean, we've got very strong relationships with the OEMs and with many lessors as well. So as you know, our fleet has always been about half leased and half owned. And so we maintain very strong relationships With both OEMs and lessors, so I, Walter, without getting into What we're contemplating certainly we can leverage those relationships.
Okay. That's encouraging. My last question is just a Flat out CASM question in the new normal, when you're back to 2019 levels, when you have a fleet That the new fleet that would bring you there, right, so when you've added aircraft to bring yourself up to 2019 levels, How materially lower do you think your CASM will be
compared to Well, like I said Walter In my opening comments, we hope to have an Investor Day towards the end of the year and we'll provide that visibility at that point in time.
Fair enough. Okay. Good luck everyone.
Thank you. Or comments. The following question is from Jimmy Baker from JPMorgan. Please go ahead.
Hey, good morning, everybody. You addressed before That your demand trends may follow the U. S. Precedent subject to seasonality, which actually makes me wonder as it relates to U. S.
Precedent, if it extends to how you treat The government credit facilities as well. What we're seeing here is airlines are issuing capital market deals in order to extricate themselves from The government handcuffs. You talked about markets being open before. Is this an option for Air Canada? Or are the terms you'd get not Necessarily better.
Also anything with the government fine print that would preclude you from doing a loyalty deal? You mentioned that the program is unencumbered.
Yes.
We did pledge Aeroplan to the government as part of the secured package, but there is No deterrent for us to take that to market later this year or next year if we so choose. And there's no doubt, I mean, like we said in the press release, Jamie, we the government financing is there for insurance purposes. We'd like to eventually replace it with Capital Markets, if required. And as Amos, I think, hinted we'll be exploring that later this year basically.
Okay. Just wanted to confirm. And then a longer term question. It's an obvious question these days, how to post COVID management behave differently, how do they think about the ATL and minimum liquidity and so forth. My question actually relates to labor though post COVID and I realize you have long term contracts in It's why I wanted to ask you as opposed to somebody with an amendable contract.
Do you have any guess as to how labor's priorities May change as a result of the downturn. Just thinking about the balance between work rules, job protection, profit sharing, that sort of thing. Apologies that it's not an Air Canada Specific question, but it's something we've been thinking about internally. And if it's too early to answer that, that's fine. You can cut me off.
It's an interesting dimension, Jamie, as to we haven't received any feedback yet. We're very close to our labor groups and our labor leaders. We've obviously got alignment of interest on reopening the economy and reopening travel here. So we speak to them at length. And like you said, in our case, we've got longer term contracts, but there's no doubt they're going to think through this.
All All of us are going to think through this and what changes we have to make, obviously, to liquidity and to preservation of jobs and everything. So I suspect They'll be thinking of that over as a pandemic as we recover from the pandemic and they'll have Conversations with airline leaders over the next couple of years. Again, they've got fairly strong jaw protection to begin with, frankly.
Yes.
But there's no reason why they may not ask for more as we go forward.
Okay. Appreciate your views. Take care, everybody.
Okay. Thanks, Jamie.
Thank you. We have no further questions registered at this time. I would now like to turn the meeting back over to Ms. Murphy. Thank you.
The conference has now ended. Please disconnect your lines at this time and we thank you for your participation.