"Sadly, today the hard truth is that by every indicator we have available to us, we believe that we will be materially smaller for at least three years," Craig Landry, Air Canada's executive vice-president of operations, said in the memo.

The announcement comes amidst shutdowns and confinement measures prompting Air Canada to ground some 225 airplanes.

In its statement on Friday evening, Air Canada said that approximately 20,000 people would be affected by this downsizing.
At a minimum, layoffs will reach 19,000 — half of the current payroll — and could go as high as 22,800.

To minimize the number of layoffs,  Air Canada is also planning to slash the schedules of flight attendants, asking them to go on leave for up to two years or resign with travel privileges.

Air Canada did not respond directly to questions about whether it would drop the wage subsidy program, which Ottawa has extended through August, allowing employees to be rehired.

Although Air Canada is not contributing to most worker wages, the airline has been putting money toward pensions and benefits that cost the company more than $1 billion last quarter.

It is expected that even with the slight pick up of the traffic before year's end, the recovery will be slow, with at least three years of subpar earnings, Air Canada CEO Calin Rovinescu said last week.

(Reporting by Asha Bajaj)