Shares of Air Canada slipped Friday, one day after it announced plans to cut 3,600 jobs and reduce service in a desperate bid to lower costs and trim mounting losses.
In a brief statement released late Thursday, Canada's dominant airline said it will slash its non-unionized work force by 20 per cent across all ranks, including senior and executive management.
The cutbacks, which will also bring job losses for about 10 per cent of the airline's unionized workers, will take place by the end of the year, the airline said.
Blaming a squeeze on demand caused "principally" by events linked to the war in Iraq, Air Canada also announced it is reducing its flight schedule and airliner capacity over the next few months.
Air Canada's shares fell 6 cents or 2 per cent to $2.94 shortly before noon EST Friday but still sat above their 52-week low of 2.40.
Last month, Montreal-based Air Canada said it needed to lower labour costs by $650-million. The airline has been struggling to deal with soaring fuel prices, a sizeable drop in international travel and growing competition from low-cost carriers.
The outbreak of war in Iraq "confirms our pressing need" to achieve the labour cost savings, president and chief executive officer Robert Milton said.
"I regret the impact of this decision on the many loyal employees affected but we need to accelerate our transformation into a leaner, lower cost carrier," he said, adding that the airline will "take decisive action as required in the days ahead to deal with any increased volatility in the market."
Air Canada employs around 36,000 people. About 88 per cent of those employees are union members.
The airline said Thursday that talks "will be undertaken with the unions in the coming days" regarding the unionized jobs cuts.
Air Canada disclosed last week that passenger traffic was down significantly in February because of concerns of a war and increased competition from its discount rivals.
On Thursday, it said capacity for the rest of March has been cut by 8 per cent compared with last year and will be cut by 15 per cent for each of April and May. That is the equivalent of removing 18 aircraft from service in March and 35 aircraft in April and May.
Air Canada said it will "assess evolving geopolitical events and their impact on traffic demand as a basis for further capacity adjustments. Forward bookings for the second quarter have been adversely impacted."
Air Canada has been working with its unions to cut $650-million from its $3-billion annual labour bill. Some unions have said they are willing to work with the company to cut costs, while others have indicated that they have little intention of giving concessions.
© The Globe and Mail
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