Waiting For Trudeau: Air Canada To Slash Up To 60% Of Workforce As Demand Craters

Canada’s largest air carrier plans to cut more than half of its workforce – at least 20,000 people -- as it deals with the devastating impact of the coronavirus pandemic on global air travel.

Air Canada revealed in an internal memo to employees that it seeks to “reduce our overall workforce by approximately 50% to 60% for the foreseeable future, subject of course to recall rights."

Written by Air Canada’s Executive Vice-President of Operations Craig Landry, the letter also said: "We will still retain 40% to 50% of our employees to fly approximately 25% of what we flew last year in the near term at least… We estimate about 20,000 people will be affected.”

The job cuts will be effective June 7.

Pascal Dery, a spokesman for the airline stated the current size of its workforce "is simply not sustainable going forward."

"We are doing this in order to conserve cash, right-size our business for the level of traffic we anticipate in the mid- to longer-term and to position ourselves to rebuild once business returns," she said.

Landry said the carrier has already distributed some layoff notices.

“Those employees who are laid off will no longer fall under [Canada Emergency Wage Subsidy] and will need to apply for the [Canada Emergency Response Benefit] or employment insurance programs,” he said.

As of May 4, the airline had cancelled 90% of its flights and furloughed 20,000 workers.

In the memo, Landry also said flight reservations have plunged 95% from last year and the airline is losing $22 million every day. He added that Air Canada wants to raise capacity to 25% sometime this year when travel restrictions have eased.

"It is almost surreal to think that only a few short months ago we were a team of nearly 38,000 who proudly carried an average of more than 141,000 people a day on 252 aircraft to 217 destinations around the world," he said. "Sadly, today the hard truth is that by every indicator we have available to us, we believe that we will be materially smaller for at least three years."

Air Canada CEO Calin Rovinescu said last week the recovery in travel demand will be slow, with at least three years of below-average earnings.

Air Canada also said it was consulting with unions over the job cuts.

The Canadian Union of Public Employees, CUPE, which represents Air Canada flight attendants, said it is negotiating mitigations and other issues with the airline. CUPE added the airline will ask employees who stay on to cut work their hours, go on leave for up to two years or resign with travel privileges.

"We know this news is not what any of us were expecting," said a CUPE bulletin. "The reality is that COVID-19 has severely impacted the demand for air travel over the past few months and into the foreseeable future. As such, there is no denying that we are dealing with the largest surplus of cabin personnel in our history."

CUPE added it is "doing everything it can to protect the livelihoods of our 10,000 flight attendant members."

However, due to Canadian law, for a layoff of this size a company needs to file a “group termination waiver” with the government.

Canadian labor law states: “When a group termination of employment is planned, a federally regulated employer is required to provide written notice to the Minister of Labour at least 16 weeks before the terminations of employment are to take effect.”

It is unclear if Air Canada has filed such a notice or not.

Karl Moore, an airline industry analyst and professor at McGill University in Montreal, said the layoffs were "not a surprise.”

"The number of people flying is down in a way we've never seen before in aviation history," he said. "Canadians are not willing to be on planes in crowded conditions. Hopefully in a year or two, we'll be beyond that."

The government of Prime Minister Justin Trudeau has suggested it may offer some financial aid to Canada’s ailing aviation industry, but no concrete details have emerged yet. Trudeau has been vague about how exactly the state may help Air Canada.

“I think we all know that this pandemic has hit extremely hard on travel industries and on the airlines particularly…That’s why we’re going to keep working with airlines, including Air Canada, to see how we can help even more than we have with the wage subsidy,” Trudeau said on Saturday.

"My interpretation is that Air Canada is playing hardball with the government, indicating that ... the industry is going to need billions," commented John Gradek, lecturer at McGill University's Global Aviation Leadership Program.