Air Canada axes 3,600 jobs over war in Iraq

Air Canada became the first airline to axe jobs because of the war in Iraq, announcing yesterday that it is shedding 3,600 staff or a 10th of the workforce.

Robert Milton, Air Canada's chief executive, said the outbreak of hostilities in the Gulf had "accelerated" the carrier's need to cut costs.

In addition to the job cuts, which are designed to help save Air Canada 650m Canadian dollars (£280m), the airline is cutting capacity by 8 per cent for the remainder of this month and 15 per cent for April and May – the equivalent of taking 35 aircraft out of service.

Elsewhere, scores of other airlines suspended services or announced cuts in capacity in response to the war in Iraq. American Airlines, the world's biggest carrier, is cancelling 6 per cent of scheduled flights on international routes, including a number of services from the US to London.

American, which is teetering on the brink of Chapter 11 bankruptcy protection, said it did not yet know whether the capacity reductions would mean more job losses. Don Carty, its chief executive, told employees: "To keep this company afloat we will have to trim some capacity as prices and supplies are impacted by the war."

Despite the widespread cutbacks, European airline stocks rose yesterday, buoyed by the falling oil price which has meant a 7 per cent reduction in the cost of aviation fuel. In Europe, jet fuel fell by $20 a tonne to $287.

Air Canada warned that it might be forced to make further capacity adjustments depending on "evolving geopolitical events". The cutbacks announced so far will reduce the airline's non-unionised workforce by 20 per cent and its unionised employees by 10 per cent. "I regret the impact of this decision on the many loyal employees affected but we need to accelerate our transformation into a leaner, lower-cost carrier," Mr Milton said.

Continental, the number five US carrier, is withdrawing one of its two daily round trips to London, British Airways has cancelled flights to Tel Aviv and Kuwait and Air France is suspending flights from Paris to Tel Aviv.

Elsewhere, KLM of the Netherlands said it would cut capacity by 7 per cent compared with a year ago and scrap a number of flights to New York. Lufthansa of Germany cancelled all flights to Kuwait, Amman in Jordan and Damman in Saudi Arabia and imposed a "war risk surcharge" of 10 euro cents on each kilo of freight. Spain's Iberia also announced a 4 per cent cut in flights for March and a 3 per cent reduction in April.