More job cuts and fleet changes spearhead the Canadian flag carrier's drive to recover from second quarter losses

Air Canada plans to lose a further 4,000 employees, realign its fleet to add more economy seats and retire older aircraft as it tries to recover from a C$108 million ($70 million) loss for the second quarter. Its half-year deficit has climbed to C$276 million compared with a C$91 million profit for the same period a year ago.

President and chief executive Robert Milton blames the poor figures on the weaker economy, reduced business class travel, increased domestic low-fare competition and higher fuel prices.

The 4,000 jobs are in addition to the voluntary redundancy programme announced last December which will see 3,500 employees leave by the year-end. Job numbers will total around 38,000 by the end of the process. The latest cuts will be made in two phases, with 1,800 leaving by 22 November and the rest to be laid off gradually from next March, when Air Canada's two-year job commitment relating to its Canadian Airlines acquisition will expire. Management is taking wage cuts of between 3.5% and 5% from 1 September, while Milton is taking a 10% cut.

Overall capacity for 2002 will be cut by about 2%. One Boeing 747-400 will be returned to the lessor GE Capital Aviation Services early next year, two Airbus 340-300s will go in February and May, and nine Boeing 767s are being withdrawn before the second quarter.

Twenty of Air Canada's 43 Boeing 737-200s will be transferred by the end of next year to its low-fare airline, with 10 to be withdrawn from service by the end of this October. The low-cost airline was launched after Air Canada abandoned a deal to acquire discount operator Skyservice (Flight International, 31 July-6 August). Air Canada Regional's fleet of 19 Fokker F28s will also be phased out by the end of next year. The F28s and other regional aircraft will be replaced after new union contracts have been signed.

Air Canada is taking delivery of 28 new Airbus narrowbody aircraft by May 2003, comprising 12 Airbus A321s, 13 A319s and three A320s. Thirteen widebodies have been or will be added to the fleet between the second quarter of this year and second quarter of 2003, including four Boeing 767-300ERs, two Airbus A340-500s, three A340-600s and four A330-300s.

Business class on some aircraft will be reduced and economy class seats will increase by 1,200, a 5.2% rise in economy seating.

"The picture at Air Canada is looking ugly, but they're doing the right things," says analyst Ted Larkin of Toronto-based HSBC Securities. "They have a strong domestic franchise and a strong position on transborder routes, but I'm not sure their low-cost carrier can compete against WestJet."

Unlike its Air Canada rival, low-cost operator WestJet of Calgary made a profit of C$8.2 million in the second quarter and C$14.1 million for the first six months. Operating revenue for the quarter rose 41% to C$112.8 million.

Source: Flight International