(Bloomberg) -- Air Canada fell as much as 38%, its biggest one-day drop since going public, after Prime Minister Justin Trudeau said the country would close its borders to all foreign travelers except Americans.
The Montreal-based company became the latest airline to withdraw financial forecasts and cut capacity as the Covid-19 pandemic plunges the global industry into unchartered territory.
The stock, the best performer in the S&P/TSX Composite Index over the decade that ended Dec. 31, 2019, has dropped 62% this year. It closed at C$18.23 on Monday, down more than 28%.
Canada said the new travel restrictions would come into effect on March 18. Airlines will be required to assess travelers and deny boarding to passengers with symptoms of Covid-19. All international flights except those from Mexico, the Caribbean, and the U.S. will be forced to land at one of four airports: Vancouver, Toronto, Montreal and Calgary.
“Covid-19 presents the global airline industry with unprecedented challenges, compounded by uncertainty as to the extent of its effects,” Chief Executive Officer Calin Rovinescu said in a statement before Trudeau spoke. “However, we are confident that after a decade of transformation and record results, Air Canada today has the agility, the team and the route network to successfully navigate through this crisis.”
Read: Airlines Slash Flights Across Globe as Demand Evaporates
Airlines have said they’ll shrink operations to a trickle of flights, severing global links and putting hundreds of thousands of jobs at risk as they fight to preserve cash and survive the coronavirus pandemic. President Donald Trump said the U.S. government would strongly back the nation’s airlines, hours after the industry said it needs $58 billion in aid.
Air Canada urged the Canadian government to follow the U.S. and Europe and consider public support for airlines.
“We believe that the Canadian airline industry should also see similar assistance, whether through forbearance of taxes, landing fees and other charges that form part of the aviation burden in Canada or otherwise until the industry stabilizes,” the company said.
The company said it has drawn down its $600 million revolving credit facility and cut schedules as more people stay grounded. Capacity, measured in available seat miles, or ASM, is expected to be reduced by about 50% in the second quarter from a year earlier. The reduction in capacity in Pacific markets for the month of April is expected to be approximately 75%, it said.
Lower jet fuel prices and cost savings from capacity reduction are expected to mitigate between 50% and 60% of Air Canada’s total revenue loss for the second quarter, the company said. To preserve cash, the carrier suspended its share repurchase program effective March 2.
Smaller Canadian rival carrier WestJet Airlines Ltd. has said it’s reviewing options to reduce costs and that it would have no choice but to reduce the number of employees.
(Adds WestJet and further context on U.S. situation, including Trump comments)
--With assistance from Kait Bolongaro and Paula Sambo.
To contact the reporters on this story: Divya Balji in Toronto at firstname.lastname@example.org;Sandrine Rastello in Montreal at email@example.com
To contact the editors responsible for this story: Kyung Bok Cho at firstname.lastname@example.org, Carlos Caminada, Derek Decloet
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