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Air Canada to reduce capacity and temporarily reduce workforce in Q2

MONTREAL — A major reduction in capacity and a wave of layoffs have been announced by Air Canada for the second quarter of 2020 as a result of the ongoing COVID-19 crisis.

With over 175 airplanes grounded and only five international cities  currently being serviced (down from 105), the airline, says Calin Rovinescu, President and Chief Executive, has been forced to implement a “significant overall response.” This includes reducing capacity by 85%-90% in Q2 compared to the same period last year, and placing 15,200 members of its unionized workforce on Off Duty Status and putting 1,300 managers on furlough.

The workplace reductions are temporary and will come into effect on or about April 3.

“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,” says Rovinescu. “It will help ensure that Air Canada can manage through this crisis that is affecting airlines everywhere. We believe that the temporary nature of these reductions, many achieved through voluntary programs, combined with other mitigation measures, will position us to restore regular operations as soon as the situation improves.”

Rovinescu adds that he regrets the impact this will have on its employees and their families. “I thank all of our employees, as well as union leaders, for working with us constructively to quickly implement these measures.”

In addition to temporary workforce reductions, the following measures will be implemented by Air Canada:

• A company-wide cost reduction and capital deferral program, targeting at least $500 million.

• Drawing down operating lines of credit of approximately $1 billion, to provide additional liquidity.

• Rovinescu and Michael Rousseau, Air Canada’s Deputy Chief Executive and Chief Financial Officer, have agreed to forgo 100% of their salary. Senior Executives will forgo between 25% – 50% of their salary while members of Air Canada’s Board of Directors have agreed to a 25% reduction. All other Air Canada managers will have their salaries reduced 10% for the entire Second Quarter.

• Air Canada suspended its share repurchase program effective March 2, 2020.

On March 30, Prime Minister Trudeau announced a new wage subsidy program, the details of which will be assessed by Air Canada. In addition, Prime Minister Trudeau also publicly acknowledged that the crisis faced by airlines will need additional assistance beyond wage subsidy and loan credit measures already announced by the federal government.