Air Canada has offered a glimpse of what the airline might look like upon emerging from the travel industry’s collapse after laying off more than half its 38,000 employees.
Michael Rousseau, Air Canada’s chief financial officer, said on Tuesday that 20,000 layoffs will allow the Montreal-based airline to reduce its daily cash burn of $22-million. The carrier’s other steps include getting rid of more than 25 Boeing 767 planes.
“We have a view as to where the market is going to move over the next six to 12 months and we want to right-size the company for that period of time, with the flexibility of bringing people back on recall rights fairly quickly,” Mr. Rousseau said.
Government measures to limit the spread of the coronavirus that causes COVID-19 have crashed economies around the world, halting factories, closing restaurants and driving unemployment to levels not seen since the Great Depression.
Air Canada has reduced its schedule by 95 per cent and parked about 225 planes amid the COVID-19 pandemic that has caused governments to close borders and tell people to stay home and avoid social contacts. Air Canada in 2019 carried 51 million passengers and had revenue of $19.1-billion, operating 1,500 flights daily with 258 planes. Air Canada said it will be three years before travel demand recovers.
“Based on every indicator we have, our normal traffic levels will not be returning any time soon,” said Peter Fitzpatrick, a spokesman for Air Canada.
Amid airline industry pleas for government aid, the federal government has provided free rent to the airport authorities and subsidized 75 per cent of wages for idled employees, to a maximum of $847 a week. Air Canada has already received a loan worth $788-million from Export Development Canada. The government is also providing bridge financing to large companies seeking at least $60-million.
Thousands of Air Canada employees have been on the wage subsidy, but the employer still bore the cost of benefits, an amount Mr. Rousseau declined to specify.
“They seem very intent on pressuring Ottawa to ante up on a funding program for the airline industry and appear to be using layoffs to get attention,” said John Gradek, an aviation lecturer at McGill University in Montreal.
Prime Minister Justin Trudeau on Saturday would not say if the government planned a larger bailout package for the airline industry.
Mr. Rousseau said Air Canada is awaiting details of the bridge loan program to see how “competitive” it is with other global airline aid programs before saying if it will apply for financing. He declined to describe the airline’s pitch to the government, and noted Canada is slow to provide information when compared with the United States.
U.S. lawmakers have approved US$50-billion in payroll grants and loans to the U.S. aviation industry. Airlines will share half this amount, with conditions that include they maintain service until as far off as 2022, and do not lay off employees until Sept. 30.
“We compete against the best 50 airlines in the world and so support packages need to be aligned, to some degree, to ensure that we continue to compete effectively against the rest of the world,” Mr. Rousseau said.
WestJet Airlines, Air Canada’s Calgary-based rival, has placed about half of its 14,000 employees on the federal wage subsidy, which has been extended until the end of August.
Air Canada said on May 4 it had $6.5-billion in cash, and is raising more, which Mr. Rousseau said will enable the carrier to survive. “We’re in a great position to power through this and come out the other side,” Mr. Rousseau said on a webcast presentation to investors on Tuesday.
To encourage people to resume flying, Air Canada is measuring the body temperature of passengers in an attempt to prevent sick people from boarding and infecting others. Passengers and crew are required to wear face masks, and the carrier is leaving every other seat empty until June 30 to allow some distance between customers.
However, Mr. Rousseau said selling just 60 per cent of a plane’s seats is not a sustainable way to run an airline.
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