Air Canada has raised nearly $500 million by selling and leasing back nine aircraft to help offset the cash drain from COVID-19. The aircraft, Boeing 737 Max 8s, are still grounded by aviation authorities.
The Montreal-based airline says it completed the sale of three Max 8s to Jackson Square Aviation, and six to Avolon Aerospace Leasing Limited for $485 million, and secured long-term leases on the planes from the two companies for $458 million.
The deal provides immediate cash and secures access to the planes when they are allowed to fly again.
Boeing 737 Max 8 Aircraft Grounded
The Boeing 737 Max 8 aircraft has been grounded since March 2019, though a recent report by the U.S. Federal Aviation Administration days before the Air Canada sale could indicate a change.
The planes were grounded after the fatal crashes of Indonesia’s Lion Air Flight 610 in October 2018 and Ethiopian Airlines Flight 302 in March 2019 causing 346 people dead.
The problem came from the aircraft’s Maneuvering Characteristics Augmentation System (MCAS)—that erroneously engaged and forced the planes’ noses to point down causing the pilots to lose control of the aircraft.
MCAS was designed to negate the weight of 737 Max 8’s larger engines that pull the plane down thus tilting its nose upward at a higher than usual angle. In that scenario, the MCAS can offset the effect by automatically pointing the nose down.
Boeing said they have since upgraded the MCAS with “three additional layers” and updated the flight control software of the 737 Max 8 aircraft.
The plane manufacturer also said the MCAS can now only be triggered by two sensors and activated once—instead of one sensor and activated repeatedly previously, and “will never provide more input than the pilot can counteract using the control column alone.”
“Pilots will continue to have the ability to override MCAS at any time,” Boeing added.
The Federal Aviation Administration (FAA) issued an update on the plane Tuesday with a draft Flight Standardization Board (FSB) report proposing pilots’ training for the Boeing 737 Max 8 aircraft, while emphasizing the need to comply with all requirements of airworthiness and safety measures before the grounding order can be lifted.
On Aug. 28, Transport Canada announced that its flight test crew had flown to Boeing’s facility in Seattle, Washington, and conducted evaluations on the engineering simulator between Aug. 23 and Aug. 25.
The team then conducted flight test evaluations on an updated 737 Max 8 test aircraft in U.S airspace on Aug. 26 and Aug. 27 to complete the validation testing. The test results will be analyzed and ready by fall, according to Transport Canada.
“Transport Canada will not lift the flight restrictions on the Boeing 737 MAX 8 until the department is fully satisfied that all safety concerns have been addressed by the manufacturer and the FAA, and that enhanced flight crew procedures and training are in place,” Minister of Transport Marc Garneau said in a press statement on Aug. 28.
The Epoch Times contacted Air Canada Thursday to ask if the company had received any update on when the Boeing 737 Max 8 aircraft grounding will be lifted, and if the timing of their sales and lease commitments have anything to do with the FAA’s FSB report.
Air Canada did not immediately reply.
The Epoch Times also asked Jackson Square Aviation and Avolon Aerospace Leasing Limited what their plans were in regards to the grounded planes and if the timing of the transactions with Air Canada had anything to do with the FAA’s FSB report.
Jackson Square Aviation did not comment as of press time, while Avolon said they will not comment publicly on any of their customers as per company’s policy.
Aviation Sector Crisis Amid COVID-19 Pandemic
Air Canada, and the rest of the airline industry has faced a severe challenge amid the pandemic. Air Canada has worked to maintain cashflow as revenues have plummeted.
“Since the start of the COVID-19 crisis, Air Canada has accessed financial markets numerous times and has successfully raised almost $6.0 billion in liquidity,” said Michael Rousseau, Chief Financial Officer of Air Canada, adding that they will continue to “maintain liquidity levels to mitigate the challenges and uncertainty ahead.”
The airline also recently completed two long-term financing deals to replace $1.4 billion in short-term debt that is coming due within the next nine months. The airline says it will continue to explore other financing arrangements that may be required to expand its cash position.
Travel restrictions and dried-up demand continue to take a toll on the airline and tourism industries, forcing the layoff or furlough of more than 30,000 employees at Air Canada and WestJet Airlines Ltd.
On Oct. 1, labour leaders from Unifor, the Air Canada Pilots Association (ACPA), and Air Line Pilots Association Canada (ALPA Canada) called on the federal government to provide “direct, financial support” to the aviation industry.
“There really is no more time to waste. We need urgent funds for the aviation sector or there won’t be Canadian airlines,” said Jerry Dias, national president of Unifor.
The aviation sector is a critical engine that facilitates national and international trade that in turn supports local business, tourism and cargo services, labor leaders emphasized.
“The aviation sector is part of Canada’s national strategic infrastructure. Airlines and airports are essential not just to the Canadian economy—but to the Canadian communities that rely on them,” said Tim Perry, president of ALPA Canada.
“We don’t want to see Canada’s pandemic recovery stifled by inaction now, forcing us to rebuild this critical sector and harming Canada’s competitiveness and future growth,” President of ACPA Robert Giguere added.
Specifically, the union leaders wanted the Trudeau government to provide $7 billion in loans for the ailing sector.
The latest update from Statistics Canada on Sept. 30, revealed major Canadian airlines continued to see drastic passenger decline in July, down nearly 90 percent from the same month in 2019, though the number of passengers is twice June’s even more dismal figures.
“Passenger numbers in Canada are down between 90 percent and 97 percent since the onset of the pandemic,” National Airline Council of Canada (NACC) president and CEO Mike McNaney said in a press statement on Oct. 1, supporting the union leaders’ calls to the Liberal government for sectoral financial aid.
“The Statistics Canada analysis demonstrates that the crisis facing our sector is unprecedented, and there is no line of sight on when the industry will be allowed to move forward from Stage Zero as all the border and travel restrictions implemented in March are still in effect.”
NACC is the trade association that represents Canada’s national and international passenger air carriers: Air Canada, WestJet, Air Transat, and Jazz Aviation LP.