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Air Canada to rehire 16,500 workers – credits federal wage subsidy program

Air Canada has answered the call from Finance Minister Bill Morneau and is planning to rehire 16,500 workers who were laid off before the federal wage subsidy was announced.

On March 30, the airline announced the layoffs as a result of COVID-19 and the imposition of global travel restrictions.

On April 1, the federal government announced the Canada Emergency Wage Subsidy (CEWS) — the yet-to-be-approved program that will pay 75 per cent of wages for any company that has seen a 30 per cent decline in revenue as a result of the pandemic.

“My message to Canadian employers is this: Get ready to rehire people,” said Morneau, in announcing the program on April 1.

CEWS not finalized – or passed into law yet

Details of the CEWS are still outstanding, and Prime Minister Justin Trudeau said this week that parliament would need to be recalled to pass the changes to the Income Tax Act to fund the program, which is expected to cost taxpayers $71 billion.

Air Canada fully expects to qualify under any scenario, it said, as it “abruptly” reduced its seat capacity by 85 to 90 per cent and is incurring significant revenue losses.

“Following an analysis of publicly available information on the CEWS, discussions with Department of Finance officials on certain questions of interpretation, and subject to its adoption into law substantially as announced, Air Canada intends to adopt the CEWS for the benefit of its 36,000 Canadian-based employee workforce,” it said in a press release. “Air Canada’s intention to adopt the CEWS has also received the support of all of its Canadian-based unions: ACPA, CALDA, CUPE, IAMAW and Unifor.”

The airline said it will apply for the CEWS retroactively to March 15 and retain or return affected employees to its payroll for the program term.

Wage subsidy versus CERB for workers

Union members could choose between inactive employment via the federal wage subsidy and no-pay, off-duty status — which would allow them to apply for the Canada Emergency Response Benefit (CERB) for people who’ve lost their jobs.

“Some may elect to take the CERB since it would offer them a greater benefit,” CUPE spokesman Hugh Pouliot said in an email to the Canadian Press.

Under the wage subsidy program, workers are paid 75 per cent of normal hourly wages or up to $847 per week. The emergency response program, on the other hand, offers $500 per week to unemployed Canadians.

“The agreement is for our members to remain on the Air Canada payroll but to stay home,” said Keith Aiken, a spokesman for the International Association of Machinists and Aerospace Workers. Some members may wish to apply for the emergency response benefit, he added.

The Montreal-based airline said retained or rehired employees will benefit from the subsidy for the length of the program — currently slated to last for up to 12 weeks, retroactive to March 15.

The layoffs of 15,200 unionized workers and 1,300 managers went into effect last Friday and were initially slated to last through May amid shuttered borders and plunging travel demand.

CEO, CFO forgoing 100 per cent of salary

In addition to the temporary workforce reductions, other measures implemented by Air Canada include:

• A company-wide cost reduction and capital deferral program, now estimated to be at least $750 million for the year, increased from the previous target of $500 million.
• Drawing down operating lines of credit of approximately $1 billion, to provide additional liquidity.
• Calin Rovinescu, Air Canada’s president and CEO, and Michael Rousseau, Air Canada’s deputy chief executive and CFO, have agreed to forgo 100 per cent of their salary. Senior executives will forgo between 25 per cent to 50 per cent of their salary while members of Air Canada’s Board of Directors have agreed to a 25 per cent reduction. All other Air Canada managers will have their salaries reduced 10 per cent for the entire second quarter.
• Air Canada suspended its share repurchase program in early March 2020.

“The Canada Emergency Wage Subsidy is an extremely important program to help employees and employers during this time of crisis, and as one of Canada’s largest employers most affected by COVID-19, we want to acknowledge the leadership of the Government of Canada in introducing it,” said Rovinescu.

“While our seat capacity and operations have decreased by more than 90 per cent overnight, we are trying to keep as many of our employees as possible during the crisis and this measure will certainly help. Depending on wage levels, many furloughed employees will get a somewhat higher amount under CEWS than they would otherwise receive from employment insurance payments plus they will maintain their health insurance and other benefits and stay more connected to our company during the program period,” said Rovinescu.

“Once the crisis passes and passenger demand increases, we look forward to returning as many employees as possible to active status as we resume normal operations.”

— with files from Christopher Reynolds at the Canadian Press