Air Canada, because of the impact of COVID-19, will temporarily reduce its workforce by laying off approximately 16,500 employees this week, effective April 3, as the airline is also reducing its capacity for its current second quarter by 85 to 90 per cent when compared to the same period last year.
This new capacity reduction measure of 85 to 90 per cent speaks to the rapidly evolving COVID-19 situation in commercial aviation, with Air Canada back on March 16 announcing it expected to reduce capacity by 50 per cent in the second quarter of 2020. Plans laid out by Air Canada on March 20 included reducing its international network from 101 airports to six and transborder (U.S.) network from 53 airports to 13.
Air Canada last week also announced it was laying off 5,100 cabin crew members. The new workforce reductions include 15,200 members of its unionized workforce, who will be placed on Off Duty Status, and the furlough of 1,300 managers. Air Canada states the workplace reductions are intended to be temporary.
“The unpredictable extent and duration of the COVID-19 pandemic requires a significant overall response. 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,” said Calin Rovinescu, president and chief executive, Air Canada, who notes many of the layoffs are based on voluntary programs. “It will help ensure that Air Canada can manage through this crisis that is affecting airlines everywhere.”
In addition to the temporary workforce reductions, Air Canada points to the other following measures in response to the business disruption caused by COVID-19:
• A company-wide cost reduction and capital deferral program, targeting at least $500 million;
• Drawing down operating lines of credit of approximately $1 billion, to provide additional liquidity.
• Rovinescu and Michael Rousseau, Air Canada’s deputy chief executive and CFO, have agreed to forgo 100 per cent of their salary;
• Senior executives will forgo between 25 per cent to 50 per cent of their salary, while members of Air Canada’s Board of Directors have agreed to a 25 per cent reduction;
• All other Air Canada managers will have their salaries reduced 10 per cent for the entire second quarter of 2020;
• Suspension of its share repurchase program effective March 2, 2020.
Subject to further government restrictions, while the crisis is ongoing
Air Canada states that it intends to continue to serve a small number of international and U.S. transborder destinations from select Canadian cities after April 1, 2020, in addition to a reduced network in Canada. The airline will also continue to operate special international flights in collaboration with the Government to repatriate Canadians abroad, as well as cargo-only flights.