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Air Canada to lay off 20,000 workers amid travel industry collapse

The tail of the newly revealed Air Canada Boeing 787-8 Dreamliner aircraft is seen at a hangar at the Toronto Pearson International Airport in Mississauga, Ont., Thursday, February 9, 2017. The Competition Bureau says Air Canada's proposed acquisition of Transat AT Inc., which owns Air Transat, will likely hinder competition and result in less choice for Canadian travellers. THE CANADIAN PRESS/Mark Blinch

Air Canada plans to lay off at least 20,000 employees as the COVID-19 pandemic continues to wreak havoc on the airline industry.

Effective June 7, the layoffs will impact more than half of the company’s 38,000 employees, it said.

The move comes amid ongoing border shutdowns and confinement measures that have tanked travel demand, prompting Air Canada to ground some 225 airplanes and slash flight capacity by 95 per cent.

“We therefore took the extremely difficult decision today to significantly downsize our operation to align with forecasts, which regrettably means reducing our workforce by 50 to 60 per cent,” the airline said in an email Friday evening. “We estimate about 20,000 people will be affected.”

At a minimum, layoffs will reach 19,000 – half of the current payroll – and could go as high as 22,800.

The blow echoes on a bigger scale Air Canada’s announcement in March to let go of nearly half of its workforce under a cost reduction scheme. The carrier proceeded to rehire some 16,500 laid-off flight attendants, mechanics and customer service agents in April under the Canada Emergency Wage Subsidy, but has not committed to maintain the program past June 6.

To minimize the number of layoffs, Air Canada will ask flight attendants to slash their schedules, go on leave for up to two years or resign with travel privileges, according to an internal bulletin to members from the Canadian Union of Public Employees sent out Thursday night and obtained by The Canadian Press.

The memo states that CUPE is in discussions with Air Canada over continuing the federal wage subsidy.

“We know this news is not what any of us were expecting,” states the bulletin, signed by the president of CUPE’s Air Canada component and two other union officials.

“The reality is that COVID-19 has severely impacted the demand for air travel over the past few months and into the foreseeable future. As such, there is no denying that we are dealing with the largest surplus of cabin personnel in our history.”

Air Canada did not respond directly to questions about whether it would drop the wage subsidy, which Ottawa recently extended through August.

The subsidy program that allowed employees – including 6,800 flight attendants – to be rehired last month covers 75 per cent of a worker’s normal hourly wages or up to $847 per week. The vast majority of those workers have stayed at home, however, as operations remain at a virtual standstill.

While Air Canada is not currently contributing to most worker wages, the airline has continued to put money toward pensions and benefits, a continuous cash drain at a company that lost more than $1 billion last quarter.

The Montreal-based company has been bleeding cash since mid-March ahead of even fewer expected passengers between April and June.

Though traffic is expected to pick up somewhat before year’s end, Air Canada CEO Calin Rovinescu said last week the recovery will be slow, with at least three years of subpar earnings.