Air Canada (TSX: AC) is reducing passenger system capacity by 25% and laying off 1,700 workers in the first quarter due to new Canadian travel restrictions aimed at curbing the resurgence of COVID-19, the company said Wednesday.
More than 200 employees in the airline’s regional express division are also being furloughed. Air Canada said it is working with unions to mitigate the impact on employees. The company released 20,000 workers in May.
The first-quarter reduction in flights will put capacity at about 20% of what it was during the same period in 2019.
Last week, WestJet slashed its schedule and the equivalent of 1,000 employees through a combination of furloughs, temporary layoffs, unpaid leaves and reduced hours.
The airline is removing about 30% of available seats currently planned for February and March, putting total capacity at less than 20% of the amount available prior to the pandemic. In addition, the airline reduced domestic frequencies by 160 departures. International capacity will be 93% lower with the airline operating only five daily flights compared to 100 last year. Overall, the airline will operate approximately 150 daily departures, returning to levels not seen since June 2001.
Any reduction in flights, especially large jets used on international routes, is a blow to cargo shippers because lower-deck space is already severely squeezed by industry cutbacks.
The moves are in response to new inbound predeparture testing requirements, provincial lockdowns and travel restrictions that have knocked down ticket sales, underscoring that the airline sector faces a bumpy road to recovery despite some recent gains in passenger traffic that have encouraged the addition of more flights.
“Since the implementation by the federal and provincial governments of these increased travel restrictions and other measures, in addition to the existing [14-day] 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 Chief Commercial Officer Lucie Guillemette in a statement. “We regret the impact these difficult decisions will have on our employees who have worked very hard during the pandemic looking after our customers, as well as on the affected communities.”
WestJet said it has experienced significant reductions in new bookings and unprecedented cancellations since Dec. 31.
“The entire travel industry and its customers are again on the receiving end of incoherent and inconsistent government policy. We have advocated over the past 10 months for a coordinated testing regime on Canadian soil, but this hasty new measure is causing Canadian travelers unnecessary stress and confusion and may make travel unaffordable, unfeasible and inaccessible for Canadians for years to come,” WestJet CEO Ed Sims said.
The International Air Transport Association said last week that air travel began to crumble again in November as governments responded to new coronavirus outbreaks with more severe travel restrictions and quarantine measures. On Tuesday, Director General Alexandre de Juniac said the industry’s situation got worse over the holiday period as Canada, the U.K., Germany, Japan and others added testing to their COVID-19 measures without removing quarantine requirements.
“This approach tells us that these governments are not interested in managing a balanced approach to the risks of COVID-19. They appear to be aiming for a zero-COVID world. This is an impossible task that comes with severe consequences” that include severe damage to the travel and tourism industries, he said during a media briefing.
Health Canada has approved two vaccines so far and the government of Canada expects most eligible Canadians to be vaccinated by September, offering airlines hope that travel will bounce back as the year progresses.
“We look forward to seeing our business start to return to normal and to bringing back some of our more than 20,000 employees currently on furlough and layoff,” Guillemette said.
Unifor, the largest private sector union, complained the Air Canada workforce reductions could have been lessened if the Canadian government had developed a plan to support the aviation industry.
The Canada Emergency Wage Subsidy (CEWS) program, designed to help employers cover payroll expenses, has preserved some airline sector jobs, but Unifor said it is insufficient.
On Tuesday, Unifor, along with the Air Canada Pilots Association, Air Line Pilots Association and the Canadian Airline Dispatchers Association, called on the federal government to develop a meaningful aid package for the airline industry. They criticized the government for allowing foreign airlines that received government bailouts in their home countries to tap CEWS funds.
“Canada’s airlines are a critical element of Canada’s infrastructure, including essential travel and transport of COVID-19 vaccines and other critical items such as PPE. Asking Canada’s airlines and airline workers to keep this vital infrastructure operational during this current crisis period without significant federal support is untenable,” said Rob Giguere, the head of the Air Canada Pilots Association. “On behalf of thousands of airline workers across the country, we urge the incoming minister of transport and the airlines to do whatever it takes to come to a deal so they can support Canadian aviation workers in the same way other countries have done.”
Air Canada suffered a $426 million pretax loss for the third quarter, with revenue down 86%.