"Air Canada to slash 6,000 jobs"
 

Air Canada to slash 6,000 jobs
Cut fleet in bid to save $500 million

Peter Fitzpatrick, with files from Ian Jack and Robert Gibbens
National Post

Tuesday, September 25, 2001

TORONTO -- Air Canada is expected to announce today it is seeking to eliminate as many as 6,000 more jobs and to ground up to 60 of its 243 mainline aircraft, sources have told the Financial Post.

The airline will meet with its unions in Montreal today to discuss ways of saving 20% of its labour costs, or $500-million, as it strives for stability after the terrorist attacks in the United States.

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[This message has been edited by Dorian (edited 09-25-2001).]

This is total sh!t! It is such a scam! Milton has been running AC like crap this year and is now getting a severe break by exploiting the WTC tragedy.

This is a joke. He should be canned ASAP.

Dorian

As one of the possible casualties, not even I believe that this is Mr Milton's fault. I don't know where the concept ever came from that any airline makes a huge profit in any given year that would protect them from a blow of the magnitude that this industry got 2 weeks ago.

If you believe that Mr Milton should be sacked then be fair and call for the sacking of all the CEO's of the airlines. Because we are all in same spot and none of them were handcuffed by the Canadian Government's intervention into the industry. I've seen a lot of friends from other airlines walk out of the airport in tears in the past week because US carriers don't have to wait for permission from Washington to make the necessary cuts and save the money needed.

Let us not forget it was Milton and crew that agreed to the government controls in order to expedite their own goals.

Dorian

Would that be the goal of avoiding even more stringent sanctions? Was that not the threat used to gain AC's agreement?

If agreeing to the Gov't controls was option A then what was option B ? Don't say that allowing CP to fail was an option as AC tried three times over the years to (1)merge, (2)back away or (3)buy the International routes. AC was rebuffed in all cases and the final word from Ottawa was "do a deal, you will not like the alternatives" and then at all turns the Gov't or its appointed agencies threw conditions on the sale.

AC would have preferred that CP went bankrupt. In fact during the debt re-alignment AC executives were hoping that one [any one] of the creditors would balk and throw the whole mess into the receivers courts.



[This message has been edited by exAC (edited 09-25-2001).]

I am prepared to believe that Collenette painted Milton into a corner, saying, effectively, "take it over, or we will amend the Act to let Onex take you over."

Either way, the company would have been overloaded with debt, and in the same boat. Even the redoubtable Gerry Schwarz couldn't have navigated the last 12 months.

Robert Milton was handed bad cards by the government. The economy turned against the airline industry. Terrorism has dealt a severe blow to the airline industry. However,AC was bleeding red ink before 11 Sep. Yes, recent events have exacerbated a tough financial picture but AC bears a good deal of responsibility for the mess it is in.
You can't run a business without a clear vision of the future. Mr Milton and the board cannot plead not guilty. They are responsible for some of the mess. They should only receive compensation for the part attributed to terrorism. AC is either a publically traded business or a governement subsidized form of public transportation. Minister Collenette has to decide.

Secret Agent, management in the vast majority of companies main goal is to stay in office with all of it's perks. I know, I'm there. The stock options can be glorious as well as the title and respect you get everywhere you go.

A takeover is tantamount to being fired, you lost. You just get a one time payout. Milton was only being human in trying to fight off Onex, and thus remain the top dog, I don't fault him for this.

But, every deal in business has a price. He gambled that he could keep all of his employees, buy a bankrupt airline, and that somehow the economy would not decline. Well he was wrong, the tech sector tanked at the start of this year.

And if Milton is a long time student of the airline game, he knew that the industry is a classically cyclically one.

He is simply now reaping what he sowed in the Onex proposal.

SA: I certainly hope that you will NOT be a casuality. Wow, it is such a tough time for those who work in the airline industry.

[This message has been edited by Flyaway (edited 09-25-2001).]

http://www.flyertalk.com/forum/smile.gif Thanks Flyaway.

I am "cautiously optomistic" but no one can be certain right now. I'm trying to keep perspective and realize how the loss of my job would not be the catastrophe that it would be for others. I only have 3 1/2 years invested, no kids and no major bills. I'm far more worried for my brothers, one has 28 years with Delta, stationed at RSW and the other has 22 years with USAir, stationed at MIA. They both have kids and all accompaning baggage, I would gladly give either one of them my job.

And served with a delicious dill sauce. How will they be able to open the cans onboard the flight now, though???


[This message has been edited by msn (edited 09-25-2001).]

I worked in the airline business for several years before deciding that it was a professional rollercoaster and going into the engineering industry. It's not quite as exciting and there are no ID90 tickets, but it's a lot more stable.

I feel for Secret Agent, but I have to agree that airlines just aren't prepared for events of this magnitude. Air Canada's reaction must be seen in a global perspective and there are many other airlines out there announcing cutbacks.

It will also be interesting to see how much flak the insurance industry comes under for pulling the plug on the airlines policies for "acts of war or terrorism" virtually overnight. That has also caused more than just a ripple, in fact Zurich airport was seriously considering closing down!

So, despite all the justified criticism that the AC management may have to stomach, I think that this one is not of their doing....

Yesterday evening's hold time to reservations was 45 minutes. Out of fun I called Westjet, their line picked up in 10 seconds. AC, please don't come begging for $$ when you have these types of problems and others in your system. I suspect a 45 minute hold time might deter some customers from booking AC.

Same information as related by employee e-mail September 26th:

Letter from Robert Milton to all employees of Air Canada

Dear Colleague:

On September 11th the world watched in horror as terrorists carried out devastating attacks on the World Trade Center and the Pentagon in the United States. Thousands of innocent lives were lost and the world as we knew it will never be the same. Our thoughts and prayers continue to be with the victims and their loved ones.

In the midst of these tragic events, Air Canada’s employees shone. You distinguished yourselves by pulling together and doing what it took to get the job done. Hundreds of flights carrying thousands of passengers
landed unexpectedly at airports across the country and Air Canada employees were often there to greet and assist them. Messages of
gratitude continue to come from customers and colleagues from some of the world’s airlines in recognition of the tremendous efforts of Air Canada’s employees.

As our operations slowly began to ramp up, many airport staff were faced with thousands of customers lined up outside, while flight crews worked hard to reassure passengers onboard. Throughout, our Call Centres had
the challenge of trying to provide answers to thousands of customers and our Technical Services teams worked around the clock to properly maintain our aircraft. The past two weeks have taken a physical and emotional toll on many employees. I am extremely proud of all of you, and I thank you for a job well done.

September 11th: what it means to Air Canada
As the days pass, our thoughts naturally start to turn closer to home. Many employees are wondering what impact this event will have on our business. Clearly our world has changed irreversibly. This event has changed not only how we work but also our financial prospects going forward. For us and for many, the world started again on September
11th.

As you know, 2001 was already shaping up to be one of the most financially challenging in the history of our industry. The sudden and
dramatic downturn in the world economy had already affected most global carriers with several, including Air Canada, posting or forecasting significant financial losses. As a result, we announced a number of far-reaching initiatives designed to reduce costs and enhance profitability.

Then came the US tragedy.

It has piled formidable hardships on top of an already difficult economic environment. Grounded aircraft, empty seats, skyrocketing
insurance, increased security costs and a gutted air travel market are just some of the challenges we face today. In the post-September 11th
world, the initiatives announced earlier are clearly not enough.

The impact the terrorist attacks have had on our industry has been nothing short of catastrophic.

American and United Airlines will each lay off 20,000 employees.

Delta has said that between 12,000 and 16,000 employees will be furloughed.

Continental, Northwest and US Airways have laid off a combined 33,000 employees. Midway Airlines has shut down. America West, American Trans Air, National Airlines, Britain's Virgin Atlantic, Alitalia and Swissair have all announced major cuts.

British Airways will cut 7,000 jobs and reduce operations by 10 percent.

Even Southwest Airlines, the financially strongest airline in North America, has now said that it has halted deliveries of aircraft and is considering cutbacks due to extremely light loads and falling revenues.
This, after just posting its 100th consecutive quarterly profit in July.

Here in Canada, Air Transat this week announced layoffs of 1,300 employees and has reduced its winter schedule by 30%.

In total, over 100,000 airline employees worldwide have already been affected. Clearly, this is an industry-wide issue that we must now face.

The actions we are taking as North America’s 7th largest airline, we are little different from Delta, Continental, Northwest, USAir or any other large U.S. carrier whose aircraft were not involved in the attack but who have suffered enormously since. Some of the large U.S. carriers were better prepared than others for this catastrophic event. Some declared immediately that they would be out of cash by the end of the month, others that they may default on debt payments, still others that they may be forced to file for bankruptcy protection by the end of October. Despite our challenges, we were well prepared with adequate cash and available
credit to weather the storm. But, like even the strongest U.S. carriers, this event has left us substantially weakened going forward.

Like our peers in the U.S., we have already announced a 20% reduction in our transborder capacity. Due to the dramatic drop in traffic and revenues since September 11th, we have now decided to reduce overall network capacity by 20% and retire our DC-9 fleet and 18 of our B737-200s as quickly as possible, with the remaining 20 B737-200 being transferred to our low fare carrier.

The reductions in capacity will mean the need to reduce our labour and other costs. I have already met with all union leaders and briefed them on the impact the terrorist attacks are having on our business. We
discussed the urgent need to reduce costs faster and further than planned and that the reductions will need to be tangible and across the board. We shared with the unions that labour costs must be reduced by
20%, or $500 million immediately.

Accordingly, we are reducing by a further 4,000 employees at least on a temporary basis (and accelerating the 4,000 which had already been announced). While an immediate reduction in payroll costs is urgent, the company will continue to work with the unions and the government to find every possible way to reduce the number of layoffs through various mitigation programs. It is expected that the launch of the low fare carrier will mitigate job losses at both the mainline and regional carrier, as qualified surplus staff will be hired on a preferential basis by the low fare carrier. The job reductions will take place as soon as practicable and affected employees will be notified as soon as possible. At the same time, Air Canada Regional will reduce its own workforce by 1,000 employees.

This is the most difficult decision any CEO has to make and it saddens me greatly that so many loyal, hardworking employees will be affected. Canada and Air Canada are not immune from the current crisis and like
the U.S. carriers, we are left with little choice in this matter.

These decisions have not been made with the aim of short-term profitability; our aim is to conserve cash during a very difficult
period. Given prevailing market and economic conditions, profitability is unlikely to occur in our industry in the short term.

I know that many of you will feel devastated by the news of the job reductions. I can assure you that this is the news which no one wanted to deliver and that this decision was not taken lightly. Some employees have blamed our current condition on our acquisition of Canadian Airlines almost two years ago. It is true that we have faced
significant integration issues, but they were exacerbated by the huge spike in fuel costs and the dramatic downturn in the economy prior to September 11th. The current challenges we face are being felt virtually
everywhere in the airline industry. It is clear that the terrorist attacks on the United States would have had a devastating impact on Air Canada even if we had not purchased Canadian, just as it has had on
nearly all carriers in North America – none of which underwent recent integrations with other carriers.

We came together as a team on September 11th. Now more than ever, we need to continue our team effort and face the current challenges
together. Our current environment leaves us no other option.

While I hope that this action will be enough to address the falloff in traffic and revenues, we are not yet in a position to fully gauge the longer-term impact that the events of September 11th will have on our
business and the consumer. We are facing an unprecedented and constantly evolving situation that, at this point, no one can accurately predict. I am, therefore, unable to provide any assurances that no further action will be required should the situation deteriorate further. However, should the economic environment improve sooner than expected, it is my hope that we will be able to recall as many affected employees as
possible.

The events of September 11th have changed our world and we have no choice but to change with it. Our best chance of making it through this storm is by making the tough decisions now.

Sincerely,

Robert