WestJet Airlines Ltd. says it is cutting jobs after the Government of Canada advised against non-essential travel outside the country and restricted overseas flights to land only at a small number of airports.
More than half of its flight attendants may be laid off as customers cancel flights en masse, according to an internal memo sent to CUPE 4070, the union that represents the airline’s cabin crews, and obtained by The Canadian Press.
That volume of layoffs is just one of several possible scenarios, Mark Porter, WestJet’s executive vice president of people and culture, said in an emailed statement Friday. WestJet’s first option is for staff to consider voluntary leaves, unpaid vacation or reduced work time. It’s also looking at reducing contractors, pausing capital projects and asking vendors for price cuts.
“The current situation is unprecedented and has escalated rapidly in the past week,” Porter said. “Unfortunately, we also have no alternative but to reduce the number of employees.”
WestJet relied on U.S. and international travel for 38 per cent of its revenue in the first nine months of 2019, according to its last public financial documents before it went private in a deal with Onex Corp. in December.
Canadians airlines, already walloped by the COVID-19 pandemic, are expected to take a further, massive financial hit amid Ottawa’s travel restrictions to rein in the virus.
Under the new government rules, the vast majority of international travel is expected to dry up in the short-term. It’s not yet clear what airports will be allowed to accept international flights, or whether “international” includes flights from the United States since such flights are typically classified as “transborder.” Transport Minister Marc Garneau also announced enhanced screening for incoming passengers.
Regardless of the final details, airlines are in for financial trouble given their exposure to international and U.S. markets.
“It’s so big it’s hard to comprehend,” aviation consultancy AirTrav Inc. president Robert Kokonis said in an interview. “They’re going to require to some government intervention or government support.”
It’s so big it’s hard to comprehend
While groundings will reduce operating costs including fuel, landing fees and navigation fees, airlines will be stuck with fixed costs such as aircraft leases and salaries. Airlines were already dealing with fallout from the grounding of the Boeing 737 Max aircraft, which regulators ordered parked exactly one year ago.
“When you’re talking about the suspension of that much flying activity, that amount of grounding, for sure Canada’s carriers are going to have to issue temporary layoffs,” Kokonis said.
Seventy per cent of Air Canada’s annual revenue came from U.S. flights (22 per cent) and international flights (47 per cent) in 2019, according to its financial statements.
Transat A.T. does not report domestic versus international revenue, but both it and Sunwing Airlines Inc. are best known for vacations to sunny destinations.
Air Canada did not immediately return a request for comment on the new measures.
Transat spokesman Christophe Hennebelle said the airline is “certainly supportive of any measure that will help protect the health of Canadians.”
“We are currently assessing the impact on our operations and expect the Government to help airlines and travel companies weather these extraordinary circumstances,” Hennebelle said in an email.
Sunwing revised its booking policy after the government recommendation against non-essential travel, spokeswoman Rachel Goldrick said in an email. Customers who booked before March 4 for travel between March 14 and April 30 can cancel and receive a future travel voucher for departures up to March 31, 2021. There will be a $100 administration fee for cancellations.
“The health and well-being of our customers and our employees is our highest priority and we are working hard under the guidance of the Public Health Agency of Canada to keep them safe when they travel with us,” Goldrick said.
The federal restrictions come during spring break, one of the busiest travel seasons every year. Airlines’ call centres were slammed on Friday as passengers scrambled to cancel travel plans. Longer than typical wait times — some passengers reported hours-long waits — led to frustration amid confusion over evolving cancellation and rebooking policies.
Air Canada advised customers to try to cancel online instead of calling. WestJet asked its customers scheduled to fly in more than 72 hours to wait to call in order to prioritize the queue. Both urged customers for patience and understanding.
Still, Kokonis said Canada’s air industry is strong, with the caveat that Transat and Sunwing are in more difficult positions than the two largest competitors. It’s positive that Canada is moving more quickly than Europe did to quell the spread of the virus, he said, but the question becomes how long the restrictions will last. They will affect the entire tourism industry, he added, including airlines, hotels, restaurants and travel agents.
At the same time, Canada announced it will not allow cruise ships carrying more than 500 people to dock until July, two months after the season was supposed to begin in April. It cancelled the entire 2020 cruise season for the Canadian Arctic given limited health capacity in the North.
Typically 2 million cruise passengers stop in Canadian ports annually.