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Mar 30, 2020

Air Canada lays off 16,500; cuts capacity amid pandemic struggle

Air Canada lays off thousands of employees

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Air Canada is temporarily letting go 16,500 members of its workforce and slashing its capacity as the company braces for the full impact of the COVID-19 pandemic.

"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 chief executive officer Calin Rovinescu in a release Monday afternoon. "It will help ensure that Air Canada can manage through this crisis that is affecting airlines everywhere."

Unionized workers are being hardest hit in the cuts, with 15,200 being placed on off-duty status, according to Air Canada. Meanwhile, 1,300 Air Canada managers are being furloughed. The airline said the cuts, which will take effect around April 3, are meant to be temporary and were partly achieved through voluntary programs. The company also said capacity will fall up to 90 per cent year-over-year in the second quarter.

Aside from the headcount reductions, Air Canada said Rovinescu and deputy chief executive Michael Rousseau are giving up their base salaries, while other senior executives will forgo as much as 50 per cent of their salaries. The airline said it has also drawn down $1 billion from its lines of credit and will target $500 million in cost savings.

The global airline industry has been reeling from COVID-19 fallout as governments close their borders in an attempt to contain the outbreak. The International Air Transport Association warned on Mar. 24 that the industry could see global passenger revenue plunge 44 per cent this year. Air Canada shares have tumbled 53 per cent so far in March, through the end of trading Monday.

Prime Minister Justin Trudeau has repeatedly acknowledged that some industries, including aviation, are facing outsized pressure as a result of the pandemic. Air Canada said in its release Monday that it will assess the impact of the new federal 75-per-cent wage subsidy once full details are released this week while it awaits more targeted aid for the airline sector.