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Air Canada weighs order cancellations, blames travel restrictions, after second-quarter loss

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(Reuters) - Air Canada said it would weigh possible order cancellations of aircraft from Boeing and Airbus , after the carrier reported a second-quarter loss on Friday as coronavirus-driven travel restrictions hit demand.

It was the airline’s second straight quarterly loss as it felt the impact of the pandemic, but it said it expected cash burn to slow slightly in the third quarter.

Air Canada shares dropped 2.11% in morning trade.

The carrier blamed Canadian travel restrictions, which it called among the most severe in the world, even as rising COVID-19 cases in the United States dampened broader industry hopes for a swift recovery in air travel.

Canada’s largest carrier is retiring 79 aircraft and slashing routes and 50% of its staff while raising equity and debt.

“Without government industry support and as travel restrictions are extended, we will look at other opportunities to further reduce costs and capital, including further route suspensions and possible cancellations of Boeing and Airbus aircraft on order, including the Airbus A220,” Air Canada Chief Executive Officer Calin Rovinescu told analysts.

The A220 is manufactured in the Canadian province of Quebec.

Air Canada expects third-quarter capacity to decline 80%. The airline saw a 96% drop in passengers carried during the second quarter.

“As these numbers indicate, most commercial aviation in our country has been effectively shut down,” Rovinescu said.

European airlines have also urged Canada to remove travel restrictions.

“Many, many Canadians write to us and tell us that they want to travel and the biggest impediment, and we did our own polling of this, the biggest impediment (is) the quarantine,” Rovinescu said.

Air Canada forecast third-quarter net cash burn of between C$15 million ($11.18 million) and C$17 million per day on average, compared with net cash burn of about C$19 million per day in the previous quarter.

The carrier would not provide guidance on fourth-quarter cash burn because of uncertainty regarding border closures and Canada’s quarantine order. Canada’s borders are closed to all non-citizens except for essential workers, and Canadians who enter the country from abroad must self-isolate for two weeks.

The carrier is leaning on revenues from cargo flights, which increased 52% during the quarter to C$269 million.

Air Canada had C$9.12 billion in liquidity, as of June 30.

Total revenue plunged 89% in the second quarter to C$527 million.

The airline reported a loss of C$1.75 billion, or C$6.44 per share, in the quarter ended June 30, compared with a profit of C$343 million, or C$1.26 per share, a year earlier.

Reporting by Allison Lampert in Montreal and Sanjana Shivdas in Bengaluru; Editing by Aditya Soni, Susan Fenton and Paul Simao

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