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Part 2 of 3 (see part 1 here) Signs of Recovery Continues Globally Global seat supply continous to rise from month to month. Asia added the most seats in February as the Chinese domestic market continues to perform closer to pevious capacity. Added Seat Supply per region in February 2021 Source: OAG In March, every region is expected to see seat capacity increase again compared to February (February is three days shorter than March so there is some element of this accounting for the increase). The fastest recovery is taking place in North East Asia, where capacity has started to return to the growth rates we saw in the last quarter of 2020. Capacity is 39.5% up on last month, and even when adjusted for the difference in days between February and March, there are still 25% more seats this month than last month. North American capacity also appears to be on an upwards trajectory, with 33%, or 20% on an adjusted basis, more seats than last month. It is worth noting that the intended seat capacity at the beginning of the month has often not materialised throughut the month as airlines have frequently adjusted the number of flights based on demand. The graph below shows the decline in actual capacity from the 1st to the last week of every month since June 2020.         Source: OAG Investor Sentiments Three airlines are publicly traded in Canada; Air Canada, Chorus and Westjet (using ONEX as a proxy). All three stocks have behaved in a similar pattern since the initial drop in March 2020, with sideays performance for a number of months until the vaccine news in November. After a solid increase in share prices going into December, the market turned more tentative again after Christmas. As more vaccines are administered and infection numbers are seemingly under control, all three stocks are now on a growth pattern, reflecting a positive future outlook. Source: Trading View Federal Government Support for the Air Sector In its fall Economic Statement 2020 (FES), the Canadian Federal Government made several pldeges in support of the aviation industry:

• $192 million to support essential air services to remote and northern communities. The funding is helping to ensure these communities have continued access to food, medical supplies, and other essential goods and services.
• Over $1.4 billion in support through the Canada Emergency Wage Subsidy

The government is committed to ensuring that Canada’s air sector continues to connect Canadians and Canadian marketplaces, as part of a dynamic aerospace industry. However, since the beginning of the pandemic, we have heard from many Canadians who had booked travel and ended up stuck with vouchers for trips they could not take instead of getting refunds. The government is establishing a process with major airlines regarding financial assistance. As part of this process, the government will ensure Canadians are refunded for cancelled flights.

• To support regional air transportation, including regional air carriers, the government proposes to provide up to $206 million over two years, starting in 2020-21, to the Regional Development Agencies for a new Regional Air Transportation Initiative.
• To support small and regional airports in making critical investments in health and safety infrastructure, the government proposes to provide additional funding of $186 million over two years, starting in 2021-22, for the Airports Capital Assistance Program (ACAP) (support for airside facility upgrades).
• To support large airports in making critical investments in safety, security and transit infrastructure, the government proposes to provide $500 million over six years, starting in 2020-21, to establish a new transfer payment program.
• The government will consider supporting further airport investments to help address the health, safety and economic impacts of COVID-19.
• To continue supporting the operations of Canada’s major airports, the government proposes to extend $229 million in additional rent relief to the 21 airport authorities that pay rent to the federal government, with comparable treatment for Ports Toronto, which operates Billy Bishop Toronto City Airport. This support to airports would be made up of repayable and non-repayable rent relief, with non-repayable support costing $29 million over 4 years, starting 2020-21.

Rent relief would be provided as follows:

• Waiving rent payments for small airports (i.e., those with passenger volumes of less than one million passengers in 2019) for 2021, 2022 and 2023;
• Waiving rent payments for medium airports (i.e., those with passenger volumes between one million and ten million in 2019) for 2021; and,
• Deferring rent payments for the largest airports for 2021, with repayment to occur over ten years, starting in 2024.

• To further assist airports to manage the financial implications of reduced air travel, the government proposes to provide $65 million in additional financial support to airport authorities in 2021-22.

 Next up: Slow recovery in Canada (Part 3 will be published on March 15, 2021).