Air Canada (TSX:AC) has announced that it is laying off 16,500 employees and cutting its capacity as the airline seeks to manage the impact of the coronavirus outbreak.
"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," said Chief Executive Officer Calin Rovinescu in a news release. "It will help ensure that Air Canada can manage through this crisis that is affecting airlines everywhere."
Unionized workers are being hardest hit by the job cuts, with 15,200 being placed on off-duty status, according to Air Canada. Meanwhile, 1,300 Air Canada managers are being let go as well.
The airline said the cuts, which will take effect on April 3, are meant to be temporary and were partly achieved through voluntary programs. The airline also said that it expects capacity to fall up to 90% year-over-year in the second quarter.
Aside from the headcount reductions, Air Canada said senior executives, including CEO Rovinescu, are giving up their base salaries, while other senior executives will forgo as much as 50% of their salaries. The airline said it has also drawn down $1 billion from its lines of credit and will target $500 million in cost savings.
The global airline industry has been hurt by the coronavirus outbreak as governments close their borders in an attempt to contain the outbreak. The International Air Transport Association has warned that the industry could see global passenger revenue plunge 44% this year. Air Canada shares have fallen 53% since mid-February.
Air Canada said in its news release that it will assess the impact of the new federal 75% wage subsidy once full details are released this week while it awaits more targeted aid for the airline industry.
