Air Canada to Cut 3500 Jobs

greenspun.com : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread

Canoe

Thursday, December 21, 2000

Air Canada to cut 3,500 jobs

MONTREAL (CP) -- Air Canada is cutting 3,500 jobs and raising air fares while warning that it will post a much bigger loss in the fourth fiscal quarter than analysts have predicted.

In the announcement late Thursday, the air carrier blamed the impact of recent bad weather for much of its latest problems. But rising competition in Canada, a weakening U.S. economy that could affect cross-border traffic and higher labour costs are also putting the squeeze on the carrier's finances.

Meanwhile, the airline, now a near-monopoly after absorbing former rival Canadian Airlines this year, blamed higher fuel costs for a six per cent domestic fare price increase that will be effective Jan. 1.

In addition, "Air Canada will undertake an employee reduction program of eight per cent, representing approximately 3,500 jobs, through attrition, a voluntary separation program and other measures," the airline said.

"More than 700 of the combined carriers' management and clerical staff have opted to take the voluntary separation program. An additional 700 members of the CAW have opted for this program, with 10 days still available for these employees to request such a package."

No airline employees in the Canadian Auto Workers union will be laid off, said Greg Spencer, a CAW national representative.

"We have negotiated a no-layoff guarantee that runs into 2004," Spencer said. "The only thing that's happening with our group is a voluntary severance and early retirement program."

Flight attendants at Air Canada recently negotiated an early-retirement incentive that could increase job attrition beyond the normal 1,000 a year.

The airline said its earnings for the fourth quarter of 2000 won't meet the forecast published by First Call analysts of 38 cents a share -- likely reaching a loss of $1.50 a share instead.

The six per cent fare hike compares with domestic increases introduced by U.S. carriers totalling about 11 per cent this year, Air Canada said.

After the integration of Canadian Airlines this year, investors and analysts have been urging Air Canada to move aggressively to cut costs to compete more effectively against discount carriers such as Royal Aviation of Montreal, CanJet of Halifax, Calgary's WestJet and Canada 3000 of Toronto. The smaller airlines have forced Air Canada to cut fares on competitive routes, squeezing its revenues in some key markets.

"Year 2000 has been a year of tremendous challenge, success and setback for Air Canada," chief executive Robert Milton said in a release.

"While we started the fourth quarter with earnings expectations in the range of analysts' projections, it is clear that the last two weeks of extremely adverse winter weather has definitely dashed any such hope.

"Furthermore, in light of the major impact that increased fuel prices have put on our results throughout the year, it is also clear that Air Canada's earnings will continue to be under tremendous pressure throughout at least the first quarter of 2001."

This year, the company incurred about $300 million in costs for restructuring and integrating Canadian Airlines and lost revenue due to a pilot strike threat and one-time merger bonuses paid or payable to several union groups. Without those items, earnings per share for 2000 are estimated to be 75 cents a share.

Milton affirmed the earlier view that $700 million in integration benefits will be realized by the second half of next year.

"We are guardedly optimistic about earnings for 2001."

On the Toronto stock market Thursday, Air Canada shares fell 30 cents to $14.25, about halfway between the 52-week high of $21.50 and the low of $7.80.

The fare increase didn't surprise David Glastonbury of Ottawa, past president of Transport 2000 Canada, a consumer advocacy group.

"I can see some justification as a result of increased fuel costs," he said. "I'm saddened to see the job losses. They've worked hard to take on an extra 2,000 people to respond to customer service."

-- Rachel Gibson (rgibson@hotmail.com), December 21, 2000


Moderation questions? read the FAQ