Are Air Canada’s Layoffs A Negotiating Tactic?

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Last Friday, Air Canada revealed plans to cut roughly 20,000 jobs from its workforce within the next three weeks. With many still trying to comprehend the magnitude of such a move from Canada’s largest airline, some are wondering if the release of the news is part of a broader strategy…

Air Canada
Air Canada is burning through C$22 million every day. Photo: Air Canada

Still no direct government assistance

With such a significant plan for layoffs looming, reporters are looking to the government and the nation’s leader for a response. So far, it remains vague,

“I think we all know that this pandemic has hit extremely hard on travel industries and on the airlines particularly…That’s why we’re going to keep working with airlines, including Air Canada, to see how we can help even more than we have with the wage subsidy.” -Justin Trudeau, Prime Minister of Canada

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While this statement from the head of the Canadian government does hint that it is open to providing more assistance, we have yet to see anything specific.

Air Canada repatriation flights
We could see 50-60% of Air Canada’s employees let go within a month. Photo: Air Canada

Canadian government assistance… for other industries

Because of this collapse in the aviation industry, many airlines have already received assistance from their respective governments. Funding was delivered to American carriers as part of the CARES Act, while the French government is supporting Air France with €7 billion in assistance. Another €2-4 billion is expected to go to KLM through the Dutch government.

With Air Canada burning approximately C$22 million every day amid a sharp drop in revenue, surely it would welcome additional government assistance above the general wage subsidy program available to it and many other Canadian businesses. This program covers 75% of wages for up to 24 weeks, retroactive from March 15 to August 29, 2020.

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However, former Air Canada Executive and commercial aviation expert, John Gradek points out that a few other industries across Canada have received direct government assistance. Justin Trudeau, announced last week up to C$469.4 million in new measures to support Canada’s fish harvesters. Two weeks ago, C$252 million in further federal assistance was announced for farmers and others in the agri-food sector.

With air travel being one of the first industries to be hit (and hit the hardest), Air Canada (as well as other Canadian carriers) must be left wondering, “what about us?

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Other sectors of Canada’s economy have received direct government assistance. The aviation sector is still waiting. Photo: Air Canada

Unable to wait any longer?

Air Canada hasn’t publicly appealed to the government for direct assistance, but it’s clear that without it, these layoffs are inevitable. A drastically smaller fleet and fewer operations, combined with a three-year-recovery estimate, all indicate that the company will need to shed jobs. “Maybe it’s on the government’s agenda…but Air Canada can’t afford to wait and wait for assistance,” says Gradek.

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Gradek doesn’t believe that the layoffs aren’t necessarily a negotiating tactic. Instead, he sees the news as a sign of desperation from the airline, which can’t continue much longer with the size of its current workforce.

Earlier, we had reported that a “group termination waiver” is needed for a move of this scale. This is what Canadian labor law has to say on large-scale layoffs:

“When a group termination of employment is planned, a federally regulated employer is required to provide written notice to the Minister of Labour at least 16 weeks before the terminations of employment are to take effect.”

As of Friday, the government had yet to receive formal notice about the layoffs from Air Canada. Sources tell CBC that there is frustration within the government that Air Canada failed to notify them of this move. However, now that these planned layoffs are public, there will be more pressure for Ottawa to respond in some way.

If the government responds with direct assistance to Air Canada, WestJet and other carriers would probably be included as well. Photo: Getty Images

Conclusion

Gradek anticipates that there will be some response from the government by the end of this week. He believes that C$3-4 billion for the industry would be needed to protect aviation infrastructure required for a post-COVID-19 Canada.

Any type of government assistance, he believes, will come with strings attached. These may include equity or environmental conditions, such as limiting carbon emissions. Other governments have provided funding on the condition that stock buybacks and executive bonuses are off-limits.

Do you think we’ll see the Canadian government respond this week with an assistance package for the aviation industry? What conditions do you think might be attached? Let us know in the comments.

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