Via Rail lays off 1,000 employees temporarily as blockades drag on

MONTREAL — Via Rail says it is temporarily laying off 1,000 employees due to blockades that continue to halt trains on CN tracks in Eastern Canada.

The Crown corporation has suspended passenger service on its Montreal-Toronto and Ottawa-Toronto routes for nearly two weeks due to the protests that have disrupted rail operations across the country.

The layoffs come amid growing pressure on the federal government to take action against rail blockades in support of Wet’suwet’en hereditary chiefs who oppose a natural gas pipeline that is to pass through their traditional lands in British Columbia.

“It is with sincere regret that we must proceed with temporary employee suspensions,” Via said in a release Thursday.

“Until CN Rail opens the remaining tracks for service, VIA Rail has no choice but to continue the cancellation of its services on a large part of its network.”

Via is to resume full service in southwestern Ontario Thursday morning but plans for partial service to begin between Montreal and Quebec City were cancelled until the end of day on Friday, it announced in a news release.

The changes come a week after announcing a near-full network shutdown last Thursday.

Chief executive Cynthia Garneau called the ongoing interruption due to a 13-day blockade east of Belleville, Ont., “unprecedented.”

“In 42 years of existence, it is the first time that VIA Rail, a public inter-city passenger rail service, has to interrupt most of its services across the country,” she said in a statement.

Via said it “commends the ongoing dialogue efforts” between the governments and First Nations leaders.

The company has cancelled 599 trains affecting more than 110,000 passengers since blockades began on Feb. 6.

Earlier this week, Canadian National Railway Co. temporarily laid off about 450 workers from its operations in Eastern Canada after cancelling more than 400 trains since protests arose.

The Belleville-area blockade on a line bisecting Tyendinaga Mohawk Territory has forced CN to shut down one-quarter of its network — all in Eastern Canada — clogging its system from coast to coast.

“It really is all across the country,” Dan Kelly, CEO of the Canadian Federation of Independent Business (CFIB) said in a phone interview. “The whole system starts to break down, and that has effects on a lot of smaller and medium-sized companies.

“I know one small manufacturer of flags and banners in Quebec that is waiting on a shipment of goods from Taiwan, has 12 employees and is set to lose a $100,000 contract because she’s not available to fulfil it while she waits for the raw materials to come in since they’re stuck on the rails right now,” he said.

The looming threat to jobs and goods prompted Kelly to send an open letter to Prime Minister Justin Trudeau warning of dire consequences and reputational damage if the crisis continues.

Agriculture and natural resources are the sectors most affected, but retailers and wholesalers are increasingly feeling the pinch — and have fewer financial resources to weather extended disruptions — according to the CFIB, which represents 110,000 small and medium businesses.

Backed-up rail operations and pop-up blockades hampering access to ports in Vancouver, Prince Rupert, B.C., and Halifax have led to bottle necks, with some ships turned away and cargo rerouted to docks in the U.S. or on to less efficient truck transport, according to the Association of Canadian Port Authorities.

Kelly is calling on Ottawa to work with the provinces and law enforcement to get trains back on the tracks.

British Columbia approved the $6-billion, 670-kilometre Coastal GasLink pipeline between Dawson Creek and Kitimat B.C., with 20 First Nations band councils signing on to the project, including five of the six band councils in the Wet’suwet’en nation.

However, Wet’suwet’en hereditary chiefs say band councils are only responsible for the land within their respective reserves because their authority stems from the Indian Act.

RBC economist Nathan Janzen says the blockades have “clouded” the economic outlook for Canadian manufacturing. The crisis is stranding an estimated $425 million in goods every day, according to the Canadian Manufacturers and Exporters trade group.

The Via layoffs and the call from the CFIB come amid mounting criticism of the Liberal government from Conservative MPs and provincial premiers, with some demanding Trudeau denounce the blockades and articulate a plan to end the them.

CIBC World Markets analyst Kevin Chiang inferred from the impact of the CN rail strike last November that the company would take a hit of three cents per share every week that the blockades continue, assuming the rail network is operating at 70 per cent to 75 per cent capacity.

That would mean a roughly $43-million dent to earnings so far, or five per cent of its net income in the first quarter of 2019.

“The impact is actually not as acute for CN as people think. That’s a function of the fact that the network is so vast and so wide, and there’s a whole part of the network that goes to the Gulf Coast of the U.S. that’s not being affected,” DBRS analyst Amaury Baudouin said in a phone interview.

“We still remain cautiously optimistic,” chief financial officer Ghislain Houle said at a conference in Miami on Wednesday.

As to whether CN will revise its earnings forecast for 2020, he said: “Stay tuned.”

This report by The Canadian Press was first published Feb. 19, 2020.

Companies in this story: (TSX:CNR)

Christopher Reynolds, The Canadian Press