Air Canada Puts 16,500 Staff on Furlough, Cuts Operations

(Bloomberg) -- Air Canada will cut capacity by as much as 90% next quarter and temporarily reduce its workforce by about 16,500 to reduce costs during the coronavirus crisis.

The decision, effective on or around April 3, puts 15,200 unionized employees on “off-duty status” while 1,300 managers will also be furloughed, the airline said Monday. The company said the cuts were required because of the “dramatically smaller operations” resulting from travel restrictions worldwide.

“It will help ensure that Air Canada can manage through this crisis that is affecting airlines everywhere,” Chief Executive Officer Calin Rovinescu said. The reductions, along with other measures, “will position us to restore regular operations as soon as the situation improves.”

Canada’s biggest airline built a cash stash that puts it at an advantage in the current turmoil, analysts have said. The company has enough liquidity to meet financial obligations, TD Securities analyst Tim James wrote on March 27 after a call with management.

“The conservative approach to how the balance sheet was managed prior to the downturn is benefiting the company today, and management is working towards exiting this crisis as strong as the company entered it,” James wrote.

Canada has pledged to craft an aid package for its airline industry, which like peers worldwide has severely curtailed flights in the fight to stop the Covid-19 spread. Prime Minister Justin Trudeau has yet to indicate what form it will take, in contrast to the U.S., where a rescue plan allocated $50 billion in aid for passenger airlines, half in loans and half in cash assistance for payroll and other costs.

Air Canada said it will draw down its operating lines of credit of about C$1-billion (about $700 billion) and said Rovinescu and Chief Financial Officer Michael Rousseau will forgo their salary, while senior executives and board members will take a pay cut.

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