Air Canada ads target anxious travellers: 'we are not going out of business'

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Air Canada ads target anxious travellers: 'we are not going out of business'
GILLIAN LIVINGSTON   Canadian Press  Wednesday, April 02, 2003

TORONTO (CP) - Air Canada, now operating under bankruptcy protection, took
out conspicuous newspaper ads Wednesday to reassure customers that it's
business as usual. But once the airline restructures, travellers can expect
to find fewer flights on fewer routes with fewer employees.  For now, Air
Canada continues to operate as before, including its Aeroplan rewards
program, the ads stated.  "It is important that you understand that we are
not going out of business," the ad said. "You can continue to book your
travel with confidence."  The airline reported "business as usual
systemwide" with over 1,400 flights on its first full day after filing for
court shelter under the Companies' Creditors Arrangement Act.  But Air
Canada is likely to look and operate much differently when it emerges from
bankruptcy protection in three to six months, because it has to slash all
its costs.

"We're likely to see capacity cuts, certainly in the domestic market," said
Rick Erickson, an independent airline analyst in Calgary. He estimated the
airline might reduce the number of seats it flies by as much as 30 per
cent.  For example, daily flights between major centres - such as
Calgary-Toronto which has about eight per day - could be reduced by several
a day, he Erickson said.  Smaller centres, such as Saskatoon which now has
about two flights a day to Toronto, could lose one of them. That's "where
it really hurts," he said.  And short routes between smaller cities could
be eliminated entirely, Erickson added. Air Canada could also transfer some
routes to its lower-cost Tango and Zip operations.  Under bankruptcy
protection "you can bet these creditors are going to be ferocious in their
efforts to cut costs," Erickson said.  The airline's workforce is "going to
take some very serious cuts," Erickson said.  "We could easily see 20, 30,
and maybe even 40 per cent cut as they get furloughed off."

Canadian Auto Workers president Buzz Hargrove, whose union represents
ticket agents and other Air Canada workers, is resigned to major staff
cuts.  "There's going to be a lot less jobs, there has to be," Hargrove
said.  "If you're going to have a smaller airline with less planes and less
service, you're going to have a lot less people."  The void left as Air
Canada eliminates routes is likely to be filled by short-haul competitors,
said Lesley Paull of Paull Travel in Edmonton.  "The smaller carriers have
been coming in to take those routes" already, she said.  But Hargrove
called the dominant airline's expected service reductions "terrible for
Canada," making travel more difficult and leaving "no national flagship
carrier and no ability to knit the country together from coast to coast to
coast."  Air Canada will also likely slim down its flights to the United
States and examine its overseas service, flying only routes where it makes
money, Erickson said.  Overall, "there's going to be a cheapening of
service," said Harry Gow, former president of the Transport 2000 lobby group.

No decisions have been made so far on how the restructuring will affect
specific services, said Air Canada spokeswoman Laura Cooke, but reviewing
labour costs, routes and all operations "is part and parcel of this
process."  Air Canada has already said it needs to eliminate $650 million a
year in labour costs, and announced 3,600 layoffs.  The carrier has already
cut capacity because of softening demand attributed to the war in Iraq and
to severe acute respiratory syndrome.  As well, Air Canada plans to sell
its Jazz regional operations and 49 per cent of its technical services
maintenance outsourcing division, along with a "significant stake" in its
ground services unit.


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