Driving sustainability

WORDS: GRAHAM NEWTON

Taking over the role of CEO at Air Canada during the pandemic shows how positive Michael Rousseau is about the future outlook of the airline and the global industry, and is working with the Canadian government to put strategies in place to ensure the industry can return safely post-pandemic and rebuild.

Although we are optimistic that the worst of COVID-19 is behind us in Canada, as with the disease itself the after-eff ects on our industry will persist and need to be dealt with.

Most immediately, we are focused on working with the government on a plan for safely reopening our country. Canada put in place some of the strictest travel and quarantine rules in the world which, for a global carrier like Air Canada, were especially harmful.

The plan should include clear metrics and requirements for each stage, not only for us to plan but also so that our customers, who we know are eager to travel, can book with confi dence. This will also allow us to expand our network and, very importantly, start recalling employees, who have made tremendous sacrifi ces.

Additionally, we are focused on minimizing our cash losses to ensure we take on as little incremental debt as possible, allowing us to recover quicker and make the necessary future investments to remain competitive and meet all of our long-term goals.

We entered the pandemic with one of the industry’s strongest balance sheets relative to our size. We had nearly C$7 billion (US$5.8bn) in unrestricted liquidity and, subsequently, we raised an additional C$6.8 billion on our own.

Though our fi nancial position was strong, the depth and severity of the pandemic exceeded even the most pessimistic scenarios. And there was ongoing uncertainty as to the future direction and duration of this crisis.

As a result, we felt it was only prudent to take advantage of the Canadian government’s large corporation support program to obtain repayable

debt commitments for up to C$3.975 billion. In addition, the Canadian government purchased C$500 million of Air Canada equity representing about 6% of the outstanding share count and provided a repayable loan to refund customers who had purchased non-refundable fares.

Ideally, we will not need to access this money. Instead, it provides an extra layer of insurance and along with our fairly deep unencumbered asset pool and access to debt markets, should provide confi dence to customers, the fi nancial markets, and our employees that Air Canada will emerge strongly from the pandemic.

Under the agreement, the government made available up to C$1.4 billion to help us refund customers holding non-refundable tickets who did not travel due to the pandemic. The fact of the matter is we have been pleased by how few customers have requested refunds and instead are holding onto future travel credits. This is an encouraging sign people want to travel again.

Though COVID-19 set us back, it was indiscriminate and aff ected all carriers. Our relative position is therefore much the same, provided Canada catches up with other countries in reopening travel.

This gives us a great foundation to rebuild. In forcing us to strip back things like our network and onboard service to the bare bones, COVID-19 has let us rethink what we were doing and given us an opportunity to build anew, particularly through technology. You will see continued attention to traditional focus areas, such as cost control, but also heightened emphasis on customer service, our employees, and the environment.

To give some examples, at the height of COVID-19 we relaunched our Aeroplan loyalty program, but with so little fl ying the normal modes of earning and redemption were unavailable. Instead, to maintain loyalty, we developed new ways for members to earn and benefi t from the program and this will continue.

Another focus and growth opportunity is cargo. While Air Canada has always carried cargo, air freight boomed with COVID-19 while belly capacity disappeared. We took full advantage of this, fi rst by using passenger aircraft modifi ed to carry more cargo and now we are retrofi tting some older 767s to all-cargo confi gurations. We are also starting to introduce an e-commerce business with partners, leveraging our international network and cargo capacity.

Though I would rather we had got there without COVID-19, the pandemic did provide us the opportunity to re-examine the customer journey and design more customer-friendly and relevant process improvements.

This is particularly true in airports, where airlines have long talked about contactless travel. But with COVID-19 we moved more quickly as part of our biosafety program. For example, in various airports we introduced virtual queuing in place of physical lineups, touchless check-in, and bag drop, touchless access, and food ordering at our lounges. And we also undertook a pilot with facial recognition for boarding in San Francisco.

These changes not only strengthen safety, they speed up and simplify processes for our customers. They are likely to be retained and further developed.

Fleet is another area where COVID-19 accelerated change. As part of our mitigation and recovery strategy, we removed 79 older aircraft from our fl eet permanently, including less effi cient Boeing 767, Airbus A319, and Embraer 190 aircraft. Their retirement will reduce Air Canada’s cost structure, simplify the fl eet, and shrink our carbon footprint.

We are able to do this because we have new Boeing 737 MAX and Airbus A220 aircraft

At Air Canada we take pride in the fact there are more than 60 languages spoken and we have repeatedly won awards for diversity & inclusion

737 MAX aircraft: At the end of 2021, we expect to have 27 of a fi rm order of 40 737 MAX aircraft

As part of the mitigation and recovery strategy, Air Canada removed 79 older aircraft from the fl eet permanently

The Canadian government purchased C$500 million of Air Canada equity, (roughly 6% of the outstanding share count)

arriving. At the end of 2021, we expect to have 27 of a fi rm order of 40 737 MAX aircraft.

The MAX is attractive from an environmental and fuel cost perspective, off ering an 11% CASM advantage over our mainline Airbus A320s. The capacity and range are optimal for us, as we can use them on long-haul North American and certain ETOPS routes, such as Hawaii from Calgary and Vancouver or London-Heathrow from Halifax and St. John’s. It is a versatile aircraft, and its capacity is well-suited for the early stages of a recovery, when loads might be lighter and bigger aircraft less profi table.

It is not a question of “should.” I would say even though the industry has already done a great deal it must do more. There are many reasons why, but the fi rst is that it is the right thing to do. Climate change is humanity’s most urgent challenge, and we have no choice but to face up to it, accept our responsibilities and do our part to combat it.

If that is not enough, we should all remember it is also good business. Anything we do to reduce the burning of fuel and creating emissions goes to the bottom line. As well, customers want us to behave responsibly and will use their wallets to show disapproval if they believe an airline is being irresponsible.

Finally, there are tremendous outside pressures, including from environmental advocates, Environmental, Social and Governance (ESG) investors, and governments. Such demands will only grow, and we would do well to get ahead of them. At Air Canada we have done this by setting a goal of net-zero emissions by 2050 with fairly aggressive interim targets so people can see our progress.

IMAGES: ISTOCK/SHUTTERSTOCK

Technology will play a central role in our

Like all airlines, we have an ongoing dialogue with governments about a wide range of issues. In fact, it often seems every government policy somehow aff ects airlines because we are so integral to every part of society and the economy.

In Canada, we are one of the few countries where air transport is almost exclusively a user-pay model and the broader societal contributions of our industry appear not to be appreciated. There are security fees, airport improvement fees, navigation fees, and airport landing and terminal fees. Throughout the pandemic more costs were added as governments had airlines conduct health checks and implement other policies, which consumed valuable resources.

The weakness, frankly unsustainability, of this user-pay model was exposed by the pandemic. With traffi c volumes falling 90%, revenues collapsed, not only for airlines but for airports and Canada’s air navigation service. This has led to higher charges and forced all of us to take on more debt that will have to be paid by future generations of travelers or reduced investments.

We need to continue to educate governments about the economic benefi ts airlines deliver so they will treat us as catalysts and accelerators. business processes. It is the primary way to cost-eff ectively ensure consistency while staying fl exible, and it has the virtue of scalability. It is only through technology that airlines can provide a satisfying, individualized experience to tens of millions of customers each year. This is why we are devoting considerable resources to such things as artifi cial intelligence, machine learning and analytics, as well as mobile and digital technologies.

That said, though customers like the convenience technology can provide, there will always be a need for positive human interaction. At the end of the day, airlines are in the customer service business. Nothing can replace the warm greeting, friendly smile or even the added assurance that comes from personal attention. For this reason, we are committed to enabling our people and encouraging them to create meaningful human connections through the customer experience. This will be supported by our continued innovation in technology, loyalty, and products.

At Air Canada we take pride in the fact there are more than 60 languages spoken and we have repeatedly won awards for diversity & inclusion. Our experience is diversity gives us a competitive advantage serving a multicultural country like Canada and a leg up in the global markets where we compete for a diverse customer base.

But it runs more deeply. Workplace diversity is one of the most important elements for an organization’s success. It brings diff erent talents and skillsets together to work toward common goals. It leads to more creative, innovative, and productive teams. We have also found that our reputation for diversity is a powerful recruiting tool, giving us access to the best and brightest from everywhere, vastly expanding the talent pool we can draw from. Check out Michael Rousseau’s outlook for aviation on our website. https://bit.ly/3gkVSrE

Giuseppe Renga, CEO and President, AMROS Group

“From our perspective as a service provider to the aviation industry, we believe that there is a strong requirement for innovation on a more holistic level, starting with the mindset, and trickling down to the entire value chain,” says Giuseppe Renga, CEO and President of AMROS Group.

Managing the aircraft as an asset is a good example of this trickle-down eff ect. The management process is rather simple to digitize, and workfl ows and processes can be easily automated. But this disguises the fact that there is an enormous range of factors to consider. Aircraft are, after all, fl ying eco-systems of engineering, operations, technology, and big data.

“And as with every eco-system, it requires the necessary care, in the form of maintenance, repair, and overhaul,” says Renga. “This aspect of asset management is crucial as the maintenance of the aircraft substantially determines its value. However, a majority of maintenance workfl ows are performed in paper and the outcome includes an amount of human error that signifi cantly impacts aircraft value, turnaround time between operators, and maintenance costs, to name a few.” Renga says this potential cost impact can be averted if aircraft owners and operators properly understood the status, and value, of their aircraft. Which is why AMROS, with decades of experience in aircraft management, maintenance and international aviation legislation, provide airlines a boundary-free understanding of the asset through future-oriented asset management software.

In May 2021, AMROS announced it is developing a holistic asset management software solution based on artifi cial intelligence and machine learning, that will deal with complex asset management challenges. The solution is under development by the wholly-owned subsidiary AMROS Innovations, with the fi rst iteration of the product scheduled for release in September 2021. This will include modules that facilitate asset transfer between operators and owners using international standard electronic formats, as well as interconnectivity with various cloud and MRO systems.

“The core idea is to provide an accessible platform to the industry with low entrybarriers into this new software environment, saving costs and maximizing return on investment from the very beginning,” says Renga.

A digital maintenance report would be accurate and timely. And this could inform future maintenance decisions, personnel

“Absolutely yes!” states Giuseppe Renga, CEO and President at AMROS Global. “Aviation is just starting to embrace future technologies and so there is a lot to do in our industry. AMROS is actively seeking young talent for its asset management software development team and already has a strong set up in place where we encourage innovation and embrace a variety of new technologies.

“New technologies like AI, machine learning (ML), robotic process automation (RPA), and the integration of artifi cial neural networks (ANN) will improve the error prone solutions in place today, generating business opportunities unseen in the industry,” he continues. “As technology and environmental issues are evolving in incremental steps that have shorter life cycles, clever IT innovation will drive owner and operator decision makers to gain access to accurate data. IT talent linking the new technologies to create innovative solutions and bringing them to life, are the future in the airline industry.”

requirements, and other resource management processes. Renga says the impact on costs would be “immense.”

Such an innovation carries with it many new considerations, however. Ownership of the data, the power to edit it, and its protection are all vital.

“Today, an aircraft operator and owner cannot push a button or touch an icon and get a real-time confi guration of an aircraft,” Renga informs. “But distributed ledger technology aims at answering these questions about data and can help aviation to really understand their assets. One thinks of the thousands of parts that need to be correctly traced in an aircraft or when and where maintenance was performed and by whom and according to which rule-set.”

The AMROS asset management software delivers automated, human-error free aircraft information collection and assessment. For Renga, therefore, the question of investment in innovation is about face. Rather than note the lack of money available for innovation, airlines simply cannot aff ord not to invest.

“The best time to invest in technology is always 20 years ago,” he jokes. “The forces in the market are constantly changing and the pandemic will most probably have a short- to mid-term eff ect on aviation returns on investment (ROI). We have seen it over and over again how the slightest disruption can aff ect ROIs and cash reserves in airlines.

“Airlines are resilient, but many will probably not survive another disruption of the magnitude of COVID-19,” he adds. “Investment in new technologies have a positive impact as they represent an added value to the company generating positive profi t and loss results. However, investments are required not only in the passenger fl ow with millions of multipliers but also in the surrounding operational and technical asset processes that have huge cost impacts in the longer run.”