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Air Canada to temporarily lay off 16,500 staff due to COVID-19 fallout

Last Updated Mar 31, 2020 at 5:58 pm EDT

MONTREAL — Air Canada will temporarily lay off 16,500 employees starting this week as the airline struggles with fallout from the COVID-19 pandemic.

Effective this Friday, the layoffs of 15,200 unionized workers and 1,300 managers will last through April and May amid drastically reduced flight capacity from the Montreal-based airline.

“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,” chief executive Calin Rovinescu said in a statement.

The carrier has halted most of its international and U.S. routes in response to the global shutdown.

States from Sweden to China to the United States have rolled out aid packages for the airline sector over the past month as borders closed and travel demand plummeted amid the spread of the novel coronavirus.

Air Canada said its cost reduction scheme aims to save least $500 million. It includes a pledge from both the CEO and chief financial officer Mike Rousseau to forego 100 per cent of their salaries, while the rest of the executive team will give up between 25 per cent and 50 per cent.

The company will draw down about $1 billion in lines of credit to provide additional liquidity for a carrier that has a $7.3 billion cash cushion to fall back on — more than the most profitable U.S. carrier, Delta Air Lines.

Earlier this month Air Canada’s flight attendant union said 5,149 cabin crew would be temporarily laid off due to the COVID-19 outbreak. The newly announced layoffs include the earlier job reductions.

The pandemic has cost thousands of jobs in the airline sector. Transat AT Inc. has laid off at least 3,600 flight attendants while WestJet has seen 6,900 departures including early retirements, resignations and both voluntary and involuntary leaves.

WestJet said Monday it is cancelling all transatlantic and U.S. routes until May 4, extending its 30-day suspension by two more weeks.

Both Air Transat and Porter Airlines have halted all flights.

The federal government said Monday that businesses of any size that have seen sharp and sudden drops in revenues due to COVID-19 will be eligible for a new federal wage subsidy program.

The 75-per-cent subsidy on wages meant to cushion the blow from the pandemic will be available to employers that can show their revenues have fallen by at least 30 per cent due to COVID-19. It will be capped at $847 a week, backdated to March 15, and the number of workers a company or other organization employs won’t be a factor.

Ottawa remains under under pressure to provide help to airlines as well as the oil and gas sector.

Hassan Yussuff, president of the Canadian Labour Congress, said he spoke recently with Finance Minister Bill Morneau and Transport Minister Marc Garneau about an airline aid package.

“In terms of the bailout that they are looking at, we think it’s necessary and it’s needed, but equally want to make sure that the bailout takes workers at the top of the priority list,” Yussuff said Tuesday.

This report by The Canadian Press was first published March 31, 2020.

Companies in this story: (TSX:AC, TSX:TRZ)

Christopher Reynolds, The Canadian Press