Air Canada has said that it will cut its first quarter capacity by an additional 25% as measures to combat COVID-19 hit bookings, while two well-placed sources said that talks over a federal aid package have stalled.
Air Canada and rival WestJet Airlines - faced with huge slumps in demand - have been negotiating with the Liberal government since November. Progress is very slow amid disagreements over what Ottawa should offer, said the sources.
Air Canada said that its capacity in the first quarter will be approximately 20% of what it was during the first three months of 2019. The latest move by Canada's biggest carrier will mean a workforce reduction of approximately 1,700 employees.
The Liberal government says that it is prepared to help the carriers but insists that they reinstate regional routes that they have suspended amid low demand, and refund passengers for tickets that they can no longer use.
One source familiar with the talks said that Air Canada wants Ottawa to offer low-cost loans, citing what France, the Netherlands and the United States have done.
"The airlines have not bent at all," said the source, who requested anonymity given the sensitivity of the talks.
Ottawa will only agree to better terms if there are "an awful lot more extracted from the airlines," the source added, without providing details.
Air Canada said that the job and route cuts "better reflect expected demand" and will "reduce cash burn," but it was not immediately available for comment about the government negotiations.
Jerry Dias, head of the Unifor trade union, said that Air Canada's move "leaves airline workers with continued disappointment in the federal government's lack of action."
"Disappointed By Airlines' Decisions To Cancel More Regional Routes"
Ottawa is "disappointed by airlines' decisions to cancel more regional routes," a spokesperson for new transport minister Omar Alghabra said.