Canada’s air transportation industry faces uniquely challenging and fluid times. COVID-19 has largely obliterated air travel, resulting in severe revenue and employment losses for airlines. The industry hopes to receive major federal assistance to offset this.
A proposed merger between Air Canada and Transat has been approved by the federal cabinet, but not by European regulators, whose agreement is required. While this deal’s future is uncertain, alternative Transat suitors are circling. This could shape the industry’s future for years to come.
Decent performance of cargo business and low fuel prices are rare bright spots for the sector.
Travel restrictions, a soft economy, and passengers’ fears of proximity to others have hammered the industry. Widespread vaccination will eventually solve most of these issues. We think this will allow leisure travel to return to pre-pandemic levels by 2023–24.
Unfortunately, business travel will be slow to recover, which will keep the number of flights below pre-COVID-19 levels during our forecast period.
We estimate that the industry will return to profitability during the second half of 2021, with a full year of profits in 2022.
The air transportation sector has suffered outsized job losses, even by pandemic standards. The industry’s employment fell 33 per cent in 2020, compared with 5.2 per cent in the broader economy. Job losses will persist in 2021, but we expect employment gains heading into 2022.
The federal government and various airlines are negotiating a COVID-19 relief package. A finalized deal would cut industry losses and add optimism to our outlook.
