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Air Canada airplanes at Vancouver's international airport in Richmond, B.C., Feb. 5, 2019.Ben Nelms/Reuters

Air Canada (AC-T) will slash its schedule by 25 per cent, lay off 1,700 employees and suspend service to another eight airports, blaming new COVID-19 testing requirements for a recent plunge in demand for travel.

The Montreal-based airline said on Wednesday the systemwide cuts will affect another 200 jobs at the independent airlines that operate its Air Canada Express regional brand.

By Jan. 23, Air Canada said, it will suspend service to eight airports: Prince Rupert, Kamloops, Comox and Sandspit in British Columbia, Fredericton, Yellowknife, and Gander and Goose Bay in Newfoundland and Labrador. Air Canada is also extending the shutdown of operations at airports in Saint John, N.B., Sydney N.S., and Penticton, B.C.

Air Canada has laid off or furloughed about 20,000 people – almost half its work force - since the onset of pandemic restrictions in March. The airline is operating at about 20 per cent of its usual capacity, and has suspended routes and cancelled flights.

Goronwy Price, chief executive of Goose Bay Airport, received official notification on Wednesday afternoon in an e-mail from Air Canada that the last flight out of the Labrador airport would be on Jan. 22 to Halifax.

He said the airport, which draws on the mining industry and nearby armed forces base for much of its traffic, will remain served by regional carrier PAL Airlines. But the loss of Air Canada severs the airport from the national network.

“The north is an expensive place to travel anyway, and if you’re going to travel nationally … you’re going to have to buy two tickets,” Mr. Price said by phone.

Although Air Canada said flights to the airports are tentatively scheduled to resume in April, Mr. Price described the suspension at Goose Bay as “indefinite.” He predicted no one will book for fear the flight will be cancelled and they will be stuck with a credit that is useless. Air Canada has flown to Goose Bay for 75 years. The suspension of flights there severs a link that will be hard to reattach, and puts out of work eight to 10 Air Canada employees at the airport, Mr. Price said.

“It’s very easy to shut something down, because you just do it,” Mr. Price said. “Starting it up, rebuilding, takes a lot of effort and time and figuring it out.”

Travel demand has plunged because of quarantines, closed borders and stay-home advisories. The federal government recently began requiring passengers entering Canada show proof of a negative COVID-19 test taken in the previous 72 hours before they are allowed to board their flight. Airlines say the new rule has caused a steeper drop in demand, in part due to difficulties obtaining a test in some countries, and confusion about the rule. The government said the new measure, in place in several other countries, is intended to slow the spread of the deadly virus.

“Since the implementation by the federal and provincial governments of these increased travel restrictions and other measures, in addition to the existing quarantine requirements, we have seen an immediate impact to our close-in bookings and have made the difficult but necessary decision to further adjust our schedule and rationalize our transborder, Caribbean and domestic routes to better reflect expected demand and to reduce cash burn,” said Lucie Guillemette, chief commercial officer of Air Canada.

Walter Spracklin, a Royal Bank of Canada stock analyst, said Air Canada is taking “prudent” steps to reduce its cash burn, which reached almost $3.3-billion in the first nine months of 2020.

After posting a quarterly loss of $685-million, Air Canada warned in November it was set to make more cuts to its schedule and the list of airports to which it flies. However, Calin Rovinescu, Air Canada’s CEO, said he would hold off, depending on the progress of financial aid talks with the federal government. With no aid on the way, Air Canada in December began cutting routes, and suspended all flights to Sydney and Saint John as of Jan. 11.

Spokeswomen for Transport Minister Omar Alghabra and Finance Minister Chrystia Freeland declined to provide details on the aid talks, but reiterated that passenger refunds would be a requirement.

The latest round of cuts means Air Canada will cease operations at Gander International Airport on Jan. 23. In good times, Air Canada flew nine daily flights to four destinations from the airport a few hours drive north of St. John’s. This dwindled to one daily flight to Halifax in the pandemic.

“We were really teetering on the side of the cliff with one fingernail left,” said Reg Wright, CEO of Gander International Airport.

Canadian airports are non-profit companies that operate independently of the government using the fees collected from the airlines, coffee shops and other businesses on the sites. The pandemic has crushed this user-pay business model, leaving airports to seek financial aid alongside the airlines. “It’s tough to solve an 85-per-cent revenue drop,” Mr. Wright said, adding the economic impact of losing Air Canada’s flights will be felt beyond the tarmac.

“When an airline leaves the market, there’s a ripple effect,” he said. “The people who fix the plane, the people who fuel the plane, the hotelier that accommodates the flight crew, the taxi driver that takes them.”

Editor’s note: An earlier version of this article incorrectly described Sydney as being in New Brunswick, not Nova Scotia.

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