Air Canada announced plans to temporarily lay off over 15,000 employees early next month, citing the “unprecedented impact” of the COVID-19 pandemic on its business.
The Canadian flag carrier said in an internal memo on Mar. 30 that it will place 15,200 unionized employees on off-duty status while furloughing roughly 1,3000 managers for a two-month period. The reductions will be effective on Apr. 3 and are intended to be temporary.
The announcement makes Air Canada the latest Canadian airline to cut staff over the last several weeks. The country’s second-largest airline, Calgary-based WestJet, plans to cut its workforce by nearly 50%, with the vast majority of reductions coming from voluntary leave options and early retirements. Montreal-based leisure carrier Air Transat has laid off roughly 70% of its workforce and will temporarily ground all flights by Apr. 2.
“To furlough such a large proportion of our employees is an extremely painful decision but one we are required to take given our dramatically smaller operations for the next while,” Air Canada president and CEO Calin Rovinescu said in a statement. “We believe that the temporary nature of these reductions, many achieved through voluntary programs, combined with other mitigation measures, will position us to restore regular operations as soon as the situation improves.”
The layoffs come as Air Canada plans to slash its schedule by 85-90% in the second quarter from a year ago, including the vast majority of its international operations.
The company is looking to shore up its balance sheet through a cost reduction and capital deferral program targeting savings of $500 million. For additional liquidity, it has drawn down operating lines of credit worth roughly $1 billion. Share repurchases have been suspended, and all executives and board members have agreed to take pay cuts or forgo their base salaries.
Air Canada said it will “assess the impact” of a new wage subsidy program announced Mar. 30 by Canadian Prime Minister Justin Trudeau, the details of which have not been released. In his accompanying remarks, Trudeau acknowledged the crisis facing the airline industry and the need for additional government aid beyond what has already been announced.
Separately on Mar. 30, the Canadian Competition Bureau released an analysis advising that Air Canada’s planned merger with Air Transat would create uncompetitive market conditions and high barriers to entry on a number of routes, setting the stage for additional concessions from the carriers if Transport Canada agrees with the Bureau’s conclusion.
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