Air Canada recorded a net loss of $1.049 billion or $4.00 per diluted share compared to net income of $345 million or $1.26 per diluted share in the first quarter of 2019. The airline reported an operating loss of $433 million in the first quarter of 2020 compared to an operating income of $127 million in the first quarter of 2019. In the first quarter of 2020, net cash flows used in operating activities amounted to $20 million, a decrease of $3,131 million from the same quarter in 2019 on deterioration in operating results and lower cash from working capital as a result of lower advance ticket sales, reflecting the severe and abrupt impact of the Covid-19 pandemic.
The airline recorded a net loss of $1.049 billion or $4.00 per diluted share compared to net income of $345 million or $1.26 per diluted share in the first quarter of 2019. The first quarter of 2020 included foreign exchange losses of $711 million while the first quarter of 2019 included foreign exchange gains of $263 million.
"Our first quarter results reflect the severity and abruptness of the impact that the COVID-19 pandemic has had on Air Canada, which started to be felt across the global airline industry in late January with the suspension by many carriers, including Air Canada, of services to China. The impact was exacerbated during the month of March with mandated social distancing, unprecedented government-imposed travel restrictions in Canada and around the world and the shutting down of economies. As significant as the financial damage has been, our prime concern remains the health and safety of our customers and our employees, whom I thank for their unwavering dedication under impossible conditions. I also want to acknowledge the pandemic's effects upon all of our other stakeholders, particularly those in the travel trade community. Be assured that we are resolutely committed to bringing our airline successfully through this crisis," said Calin Rovinescu, president and chief executive officer of Air Canada.
"The past quarter was the first in 27 consecutive quarters that we did not report year-over-year operating revenue growth. Our solid January and February results gave us every encouragement that this performance would continue until the sudden and catastrophic impact of COVID-19's onset in Europe and North America in early March. We are now living through the darkest period ever in the history of commercial aviation.
"Over the last decade, we have infused entrepreneurial spirit, resilience, innovation and discipline into Air Canada's DNA and these attributes will serve us well as we navigate through this crisis. Due to disciplined long-term capital allocation we ended 2019 with $7.380 billion in unrestricted liquidity and still have access to significant unencumbered assets to support additional financings. We reacted quickly to the severity and abrupt impact of the COVID-19 pandemic, taking numerous measures, including drawing down credit lines and completing other financings to increase our liquidity, reducing our close-in capacity by more than 90 per cent, instituting a significant cost reduction and capital reduction and deferral program and implementing a temporary furlough of the majority of our unionized and management workforce, as well as management wage reductions for continuing employees.
"We have developed a plan to manage through a protracted downturn, recognizing that the pandemic and its fallout will materially impact both customer demand and our liquidity in the short and medium term. Moreover, while the duration of the pandemic and its fallout remain unknown, it is our current expectation that it will take at least three years to recover to 2019 levels of revenue and capacity. We expect that both the overall industry and our airline will be considerably smaller for some time, which will unfortunately result in significant reductions in both fleet and employee levels. While it is not possible to predict the course of the pandemic globally or indeed the changes that will be required of the airline industry, our determination is to ensure that our company is positioned to emerge in the post-COVID-19 world as strong as possible and capitalize on the opportunities that will inevitably arise," concluded Rovinescu.
Air Canada expects to reduce second quarter 2020 capacity by 85 to 90 per cent when compared to 2019's second quarter. Third quarter 2020 capacity is expected to be reduced by approximately 75 per cent when compared to the third quarter of 2019. The airline will continue to dynamically adjust capacity and take other measures as required to account for health warnings, travel restrictions, border closures globally and passenger demand.
In light of the Covid-19 pandemic and significant uncertainty around resulting travel restrictions and passenger demand, concerns about travel due to the pandemic or precautions such as physical distancing, as well as the overall economic environment and recent significant volatility in fuel prices and foreign exchange rates, Air Canada is not providing assumptions around GDP, fuel prices or foreign exchange rates. In addition, Air Canada is withdrawing all guidance, including as previously announced, all first quarter and full year 2020 guidance as well as its full year 2021 guidance (including its free cash flow guidance for the 2019-2021 period).