The bad news keeps whacking Finance Minister Bill Morneau in the kisser.
And it keeps on coming.
At least, it sure seems that way.
Morneau–to understate–has a very full plate these days.
- Never mind that on Monday, Canada’s new central bank governor advised Canadians to tighten their safety belts because a “prolonged and bumpy” road to recovery from the economic effects of COVID-19 is looming large.
- Never mind that last Friday, Statistics Canada reported that retail sales in Canada have gone down 33.6 per cent since the social and physical distancing measures were put in place in mid-March.
Let’s just talk yesterday, Wednesday.
- One of the U.S.’s Big Three credit agencies, Fitch Ratings, announced it was downgrading Canada’s credit rating to AA+ from AAA, citing the federal government’s move to borrow about a quarter of a trillion dollars to prop the economy up during the pandemic lockdown.
- The announcement came the same day that one of the country’s major airlines, WestJet, said it was laying off 3,333 workers and is planning to consolidate and contract out much of its operations as the pandemic continues to sink the majority of demand for air travel.
First to Fitch: The CBC’s Peter Zimonjic reports that the agency said that while it is downgrading Canada’s rating, it expects Canada’s debt-to-GDP ratio to stabilize over the medium term before the economy gradually starts recovering with the help of monetary and fiscal stimulus.
According to Zimonjic, Morneau’s office responded to the news with a statement saying that Canada’s pre-pandemic economic health allowed the federal government to “deploy our fiscal firepower to protect Canadians” and that the economy would be in far worse shape had it not acted.
“Canada continues to be in a stronger financial position than many other countries in the G7 and G20,” the statement said.
“Global markets continue to invest in Canadian bonds, driving our cost of borrowing to historic lows. Moving forward, we will continue to be fiscally responsible while acting to protect our country and its economy.”
Fitch last confirmed Canada’s rating in July of last year.
Zimonjic reports that S&P Global Ratings and Moody’s both still have Canada listed as top tier borrowers. S&P Global Ratings last confirmed Canada’s rating in November of last year, while Moody’s last confirmation came in May of this year.
(Fitch Ratings, Moody’s and S&P Global Ratings are the three credit rating organizations approved by the U.S. Securities and Exchange Commission to provide financial information for regulatory purposes.)
WestJet: Wednesday’s layoffs–all 3,333 are permanent–are just the latest for the Calgary-based airline.
As the CBC’s Sarah Rieger reports, the company had 14,000 staff before pandemic border closures and travel restrictions grounded two-thirds of its fleet.
Right now, the company says 4,500 employees are on payroll and that it is looking for ways to bring back 5,500 employees temporarily laid off.
“WestJet has remained self-sufficient throughout this extended crisis, cutting our costs by more than 60 per cent,” CEO Ed Sims said in a YouTube video about the decision.
“And yet, despite these efforts, the damage we’ve incurred from a weakened demand environment is being compounded by multiple factors … the reality in which we find ourselves requires difficult and often painful decisions to ensure our continued viability in the future,” Sims said.
Rieger writes that the company will consolidate its call centre in Alberta, and contract out its operations in all but four of its 38 domestic airports, leaving just Calgary, Edmonton, Vancouver and Toronto.
It’s also restructuring office and management staff.
The company says it has instituted a hiring freeze, cut top management salaries and paused more than 75 per cent of its capital projects.
WestJet says its scheduled operations have been reduced by more than 90 per cent year-over-year due to the pandemic.
With files from CBC News (Peter Zimonjic, Sarah Rieger, Evan Dyer)