Air Canada to cut 2,000 jobs and 7$ of services
Air Canada will cut 2,000 jobs and crimp its capacity by 7 percent as runaway fuel prices sap the profitability of many of its routes, the country’s biggest airline said.
Air Canada’s drastic action, which translates into a 7 percent cut in its workforce, comes after the carrier tried to fight the impact of surging oil prices by parking older, gas-guzzling jets and tacking fuel surcharges onto its fares.
However, in the five weeks since it instituted extra fees to deal with then-record oil prices, the latter have run up another 16 percent to near USD$140 a barrel, surprising energy analysts.
“I don’t know what the tipping point was, but there’s no question that in the last month or so the fuel crisis has gotten worse for airlines and Air Canada’s really kind of following the lead of most of the major US airlines in cutting back capacity for the fall,” Versant Partners analyst Cameron Doerksen said.
Also on Tuesday, Virgin America, the low-cost carrier partly owned by Britain’s Virgin Group, said it will cut its capacity by 10 percent in the fourth quarter.
Sky-high fuel prices, as well as a sputtering US economy, have combined to force some US airlines into bankruptcy protection, while spurring others, such as Delta Air Lines and Northwest Airlines, into merger talks.
Air Canada’s capacity cuts, to take effect in autumn and winter schedules, will be deepest on its Canada-United States transborder network, which will shrink by 13 percent. International flights will drop by 7 percent.
Domestic capacity will be trimmed by 2 percent, reflecting the relative strength of the Canadian economy and travel demand despite high oil prices, spokeswoman Angela Mah said.
At current prices, Air Canada spends an average CAD$230 per passenger on fuel for a round-trip flight, up 57 percent from 2007, it said.
Doerksen said Air Canada’s move — its first layoffs since it emerged from bankruptcy protection in 2004 — was necessary to maintain financial health and shouldn’t affect plans by its parent company, ACE Aviation, to part with its remaining 75 percent stake.
ACE Chief Executive Robert Milton has been weighing options for winding up the holding company since last year, a process that has been complicated by industry woes and Air Canada’s weak stock price.
The airline warned its cuts could be deeper than those detailed on Tuesday if fuel prices remain at current levels.
“The loss of jobs is painful in view of our employees’ hard work in bringing the airline back to profitability over the past four years,” Chief Executive Montie Brewer said in a statement. “I regret having to take these actions but they are necessary to remain competitive going forward.”
It expects 2008 capacity, measured in available seat miles, to be in a range of up 1 percent to down 1 percent from 2007. That’s lower compared with a May forecast of a rise in capacity between 1 percent and 2.5 percent.
A Report by The Mole from Canadian media
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