Air Canada to cut 5,000 more workers, for total of 12,500; grounds 84 planes

ALLAN SWIFT Canadian Press Robert Milton of Air Canada in Montreal Tuesday. (CP/Paul Chiasson)

MONTREAL (CP) - Air travellers will have fewer flight choices after Air Canada announced Wednesday it will cut 5,000 more employees and reduce its capacity by one-fifth.

Chief executive Robert Milton warned of even more cuts ahead if confidence in air travel erodes further.

The job cuts, subject to talks with unions and a possible federal government bailout, follow Transport Minister David Collenette's ruling Tuesday that Air Canada could ignore some labour agreements that guaranteed job security.

When the latest cuts are completed, Air Canada will have about 35,000 employees, down from 47,000 after its merger with Canadian Airlines early last year.

Service will be maintained to all destinations but travellers will have fewer flight choices, Milton said.

In Ottawa, Collenette all but promised an assistance package for the industry as requested by Air Canada, although he said the government is still sorting out what financial losses are attributable to the Sept. 11 attacks.

"I don't like the word bailout. We're looking here at assisting an industry that has been crippled through no cause of its own."

Jacques Roy, a professor in administration at the University of Quebec, said Collenette has to be careful not to help Air Canada in a way that hurts other Canadian carriers.

"Now we see Air Canada pulling back from those (international) destinations and coming back to compete with the other players in Canada," said Roy.

Canada's dominant air carrier was plagued by high labour costs, rising fuel bills and overcapacity even before the terrorist acts devastated the global travel industry.

Collenette said Wednesday that "If there are structural issues over and above what occurred on Sept. 11, then they have to be addressed in another way."

And Nav Canada, the operator of the Canadian air traffic control system, said Wednesday it expects a revenue shortfall of $150 million or more over the next year. It is working on "a variety of measures" to cut costs and increase revenues.

Milton described the latest job cuts as "the most difficult decision I've ever had to make as a chief executive. But the catastrophic events of Sept. 11 and their unprecedented impact on the airline industry have left Air Canada, like every other large global carrier, with little choice."

"They have been overstaffed," Reid said.

Airline union leader Buzz Hargrove, president of the Canadian Auto Workers, said the 5,000 additional jobs being cut "are lower than we anticipated," since the airline was warning the union privately of cuts as high as 10,000.

The CAW and other airline unions are meeting with Collenette on Thursday.

Now the government says it agrees with Air Canada's interpretation of the merger legislation that job guarantees did not cover terrorist attacks.

The aircraft removals include all of Air Canada's 17 aging DC-9s and 38 Boeing 737-200s, as well as 29 smaller aircraft from the regional fleet.

Air Canada shares closed Wednesday up 17 cents at $3.37 on the Toronto Stock Exchange.

The merged Canadian and Air Canada had about 180 employees per aircraft, he said, above the North American average of 145.

http://www.nationalpost.com/news/updates/story.html?f=/news/updates/stories/20010926/business-918032.html

-- Martin Thompson (mthom1927@aol.com), September 27, 2001