Air Canada to use government subsidies to keep employees on payroll

(Reuters) - Air Canada <AC.TO> said on Wednesday it plans to adopt the government's wage subsidy for its 36,000 Canada-based workforce, in a bid to keep its employees on payroll as it wrestles with the economic fallout from the COVID-19 pandemic.

The Canadian government recently unveiled a wage subsidy program, known as the Canada Emergency Wage Subsidy (CEWS), that would cover up to 75% of the workers' wages for employers of all sizes who had suffered revenue declines of 30% or more due to the pandemic.

Prime Minister Justin Trudeau said on Wednesday Ottawa would modify the program to only require a 15% revenue decline in March so that more companies could qualify.

The CEWS aims to help employers keep and return Canadian-based employees to payrolls for a period between March 15 to June 6, in response to the challenges posed by the pandemic.

Unions representing Air Canada flight attendants and maintenance workers said on Wednesday they were working with the carrier to seal a deal that would give 75% of normal hourly wages to employees until June 6 or earlier, once the workers are recalled for duty.

The deal would be retroactive to March 15, the Canadian Union of Public Employees and International Association of Machinists and Aerospace Workers representing the Air Canada workers said.

Air Canada workers will decide whether it is in their best interest to return to work or take benefits under a separate emergency federal program that currently offers C$2,000 a month to Canadians who have had no income for a minimum of 14 days because of the outbreak, two sources familiar with the matter said.

The Canadian carrier said it now expects its cost reduction and capital deferral program to be at least $750 million for the year, up from its previous target of $500 million.

The airline's shares were up more than 9% at C$18.10 by 0443 GMT. The stock has declined about 63% so far this year.

"Depending on wage levels, many furloughed employees will get a somewhat higher amount under CEWS (Canada Emergency Wage Subsidy)," Chief Executive Officer Calin Rovinescu said.

Major airlines across the world have announced layoffs, wage cuts and unpaid leave for staff amid the pandemic that has dried demand and brought travel to a virtual halt.

Air Canada said in March it would cut second-quarter capacity by 85%-90%, place about 15,200 unionized employees off duty and furlough about 1,300 managers, beginning on or about April 3.

(Reporting by Sanjana Shivdas and Ankit Ajmera in Bengaluru, Allison Lampert in Montreal and Kelsey Johnson in Ottawa; Editing by Shailesh Kuber, Aditya Soni)