An airline analyst says Air Canada (TSX:AC.B) must take axe to network by cutting more than half of routes and aircraft and 6,000 jobs to save more than $2 billion in a bid to survive.
Jacques Kavafian of Research Capital Corp. said a dramatic structural shift is required rather than merely tweaking supplier contracts to extract short-term savings.
It would involve scrapping the agreement with regional feeder Jazz (TSX:JAZ.UN) and reducing Air Canada's fleet, domestic and U.S. routes by about half.
The complexity of the task requires the changes to be made through creditor protection, which could come in three months, he said.
Kavafian said the only reason Calin Rovinescu was brought in this week to head Canada's largest airline is to reduce expenses in the face of falling revenues.
With many of the costs already trimmed out, downsizing the airline to concentrate on profitable hubs and routes is paramount, he said.
Under Kavafian's plan, Air Canada would abandon hubs in Montreal, Halifax and Calgary. It would also walk away from many routes, particularly in Edmonton, Calgary, Halifax and Ottawa.
Some international routes could also be eliminated, allowing it to shed several aging Boeing 767s.
Air Canada lost $1 billion last year and faces a cash crunch that is expected to worsen as few travellers, including business people, take to the skies in the faces of the economic recession.
On the Toronto Stock Exchange, the airline's shares gained four cents at 82 cents in afternoon trading, a gain of 5.13 per cent.
