CTV.ca News Staff

Air Canada is blaming rising fuel costs for a decision to slash 2,000 jobs and reduce its capacity.

The cuts stem from a seven per cent reduction in capacity in the airline’s fall and winter schedule, which means less staff will be needed.

On its website, the company claims to have the equivalent of 23,900 full-time employees, with an average of 1,370 scheduled flights per day in 2007.

Air Canada president Montie Brewer said in a statement issued Tuesday that the job losses were “painful,” but necessary as the airline must reduce flying time to stay profitable.

“I regret having to take these actions but they are necessary to remain competitive going forward. Air Canada, like most global airlines, needs to adapt its business and reduce flying that has become unprofitable in the current fuel environment,” he said.

The airline, the first in Canada to introduce a fuel surcharge, claims that every dollar rise in the price of oil per barrel translates into a $26-million increase in its annual fuel bill.

Fuel accounts for more than 30 per cent of Air Canada’s operating costs. The company said that the rapid rise in fuel costs could mean it will face a bill that’s $1 billion higher than in 2008 than it was in 2007.

The capacity reduction, which will total seven per cent, will begin in October. The reductions will allocated as follows:

  • Domestic: Two per cent
  • U.S. transborder: 13 per cent
  • International: Seven per cent

Air Canada has previously announced the suspension of its Toronto-Rome flight. However, it will remain over the summer.

Canada’s largest airline has also previously announced the suspension of its Vancouver-Osaka, Japan flight, which will stop on Oct. 26.

An Air Canada spokesperson told CTV.ca that the details of the cuts haven’t been determined yet.

The reductions mean Air Canada has reduced its capacity growth outlook.

It had previously forecast growth of up to 2.5 per cent above 2007 levels. That has now been cut to anywhere from minus one per cent to plus one per cent.

Strategy questioned

A University of Toronto business professor and airlines industry analyst questioned Air Canada’s strategy, saying it could hurt the airline rather than help.

“I’m really concerned Air Canada is going to get itself into a vicious cycle,” Joseph D’Cruz of the Rotman School of Management told CTV Newsnet on Tuesday.

“As morale goes down, the treatment that frontline employees offer to passengers is bound to suffer. In the airline business, everything depends on how the frontline employees behave,” he said.

One beneficiary could be Westjet, which could see its market share rise, he said, adding it could force further cutbacks in staff and flights at Air Canada.

D’Cruz said the airline showed little concern about the welfare of their employees in its announcement.