Air Canada to lay off 16,500 employees amid pandemic-related flight cancellations

Air Canada will temporarily lay off 16,500 employees starting this week as the airline struggles with fallout from the COVID-19 pandemic.

Effective this Friday, the layoffs of 15,200 unionized workers and 1,300 managers will last through April and May amid drastically reduced flight capacity from the Montreal-based airline.

"To furlough such a large proportion of our employees is an extremely painful decision but one we are required to take given our dramatically smaller operations for the next while," chief executive officerCalin Rovinescu said in a statement.

Rovinescuand CFOMichael Rousseau will forego 100 per cent of their salaries for the second quarter, the company said in a statement. Other senior executives will lose between 25 and 50 per cent of their salaries, while members of the board will forego 25 per cent.

The airline says it will also stop buying back its shares while the current crisis unfolds.

The carrier has halted most of its international and U.S. routes in response to the global shutdown.

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States from Sweden to China to the United States have rolled out aid packages for the airline sector over the past month as borders closed and travel demand plummeted amid the spread of the novel coronavirus.

Air Canada said its cost reduction scheme aims to save least $500 million. The company will draw down about $1 billion in lines of credit to provide additional liquidity for a carrier that has a $7.3 billion cash cushion to fall back on more than the most profitable U.S. carrier, Delta Air Lines.

Earlier this month Air Canada's flight attendant union said 5,149 cabin crew would be temporarily laid off due to the COVID-19 outbreak. The newly announced layoffs do not include the earlier job reductions.

The pandemic has cost thousands of jobs in the airline sector. Transat AT Inc. has laid off at least 3,600 flight attendants while WestJet has seen 6,900 departures including early retirements, resignations and both voluntary and involuntary leaves.

WestJet said Monday it is cancelling all transatlantic and U.S. routes until May 4, extending its 30-day suspension by two more weeks.

Both Air Transat and Porter Airlines have halted all flights.