A matter of days after Air Canada moved to reduce its workforce by 50%, or 16,500 employees, the Canadian government has come to the rescue. Canada's emergency wage subsidy has been extended to cover large companies like Air Canada. It's a lucky break for the airline's employees and means their jobs are safe for at least another two months.

A lucky reprieve for Air Canada's employees

Like airlines everywhere, Air Canada has been slammed by the global pandemic. The airline has reduced its capacity in Q2 2020 by 85%-90%. In addition, Air Canada is to start a company-wide cost reduction and capital deferral program, targeting at least CAD$500 million.

The airline will draw down operating lines of credit of approximately CAD$1 billion to provide additional liquidity. To further cut costs, 15,200 line employees and 1,300 managers were to be furloughed.

But those employees and managers have a reprieve courtesy of the Canadian government and their fellow taxpayers.

To discourage businesses from laying off employees, the Canadian government has introduced a wage support program, called the Canada emergency wage subsidy (CEWS). The government is offering a 75% wage subsidy to businesses that have suffered a 30% plus downturn because of the global pandemic. The subsidy, backdated to mid-March, will cover annual earnings up to $58,700.

Wage subsidy scheme extended to cover large businesses like Air Canada

According to a report by the Canadian Broadcasting Corporation, the original wage subsidy program only extended to small and medium-sized businesses. The government extended to cover large businesses some days ago, offering a lifeline to the Air Canada employees.

Yesterday, Air Canada announced that it was getting on-board. In a statement, Calin Rovinescu, President and Chief Executive Officer at Air Canada said;

"The Canada Emergency Wage Subsidy is an extremely important program to help employees and employers during this time of crisis, and as one of Canada's largest employers most affected by COVID-19, we want to acknowledge the leadership of the Government of Canada in introducing it."

But with Air Canada now running minimal services, the airline doesn't need its employees who will receive CEWS to clock on. They can stay home and watch Netflix, or mind the kids. But they will keep their existing benefits packages and will be brought back to work as soon as regular services start again.

"Depending on wage levels, many furloughed employees will get a somewhat higher amount under CEWS than they would otherwise receive from Employment Insurance payments plus they will maintain their health insurance and other benefits and stay more connected to our company during the Program Period," Mr Rovinescu said.

Even the unions are on board, thanking the government through gritted teeth.

Other countries offer similar packages to airline employees

Canada isn't the only country digging deep to subsidize employees. In the United Kingdom, the government will pay 80% of salary for employees who are kept on, covering wages of up to £2,500 a month. Australia will pay an AUD$1500 fortnightly payment to employees temporarily laid off. Governments elsewhere are devising and implementing like policies.

It's an expensive but smart strategy. For airlines like Air Canada, it keeps employees not working linked to the airline. While staying and home and couch surfing isn't very exciting, it means airlines maintain access to their pools of expensively trained and skilled employees. For the employees, it means some financial security and psychological well being.

As the situation improves and Air Canada gets back in the air, having those employees on hand means the airline will have one less hurdle to overcome.