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UPDATE 4-Air Canada says encouraged by government aid talks after carrier reports loss

·2 min read

(Recasts first sentence with union official, adds comments byunion official, other details, updates stock movement)

By Allison Lampert and Ankit Ajmera

MONTREAL, Feb 12 (Reuters) - Air Canada's chiefexecutive and a top union official on Friday expressedconfidence Ottawa would provide an aid package for airlinesafter the carrier reported its biggest annual loss in at least19 years due to COVID-19.

Air Canada shares were up 4.5% in afternoon trade. Itreported a net loss for 2020 of C$4.65 billion ($3.65 billion)compared with a 2019 profit of C$1.48 billion.

Airlines have been among the hardest hit by the epidemic aspeople stay home.

Canada's largest carrier, which last year cut over half itsworkforce, or 20,000 jobs, and other airlines are negotiatingwith the Liberal government on an aid package.

"I am very encouraged by the constructive nature ofdiscussions that we have had ... I am more optimistic on thisfront for the first time," Air Canada Chief Executive OfficerCalin Rovinescu said, a day after Canada approved the carrier'spurchase of rival Transat A.T.

Jerry Dias, president of the Unifor private sector tradeunion, said he was confident an aid deal would happen.

"I've been speaking to the federal government as well asCalin and everybody and there's no question, it's imminent,"Dias said in a phone interview, without providing furtherdetails.

A government source in the finance ministry, which isleading the talks, declined to comment on Rovinescu's remarks onthe grounds the negotiations were continuing.

Canada has previously said passenger refunds and therestoration of regional routes would have to be part of a deal.

Carriers agreed in January to suspend winter travel tocertain sun destinations through April 30 amid fears that newstrains would spread during spring break.

Rovinescu, who retires this month, told analysts he expectsan "improved dynamic" around the end of April, with COVID-19testing replacing some quarantines.

Canada has some of the world's toughest travel rules with amandatory 14-day quarantine for arrivals and some domesticrestrictions.

"It will not be completely eliminated, but we do see thepotential for it to go to a five-to-seven-day quarantine,"Rovinescu said.

Asked about the CEO's comments, Canada's chief medicalofficer, Theresa Tam, said, "it's probably premature right nowto know what is happening at the end of April."

Air Canada said it was seeking further cost reductions,plans to reduce its first-quarter capacity by about 85% comparedwith a year earlier, and projects quarterly net cash burnbetween C$1.35 billion and C$1.53 billion.($1 = 1.2737 Canadian dollars)(Reporting by Ankit Ajmera in Bengaluru and Allison Lampert inMontrealand David Ljunggren in OttawaEditing by Vinay Dwivedi and Matthew Lewis)