Air Canada, following the path of several US counterparts, said yesterday it will cut total system capacity by 7% year-over-year in this year's fourth quarter and the 2009 first quarter and slash its workforce by 2,000. "I regret having to take these actions but they are necessary to remain competitive going forward," President and CEO Montie Brewer said. "Air Canada, like most global airlines, needs to adapt its business and reduce flying that has become unprofitable in the current fuel environment. If fuel prices remain at current levels, we can anticipate further capacity reductions." Every C$1 ($0.97) increase in the per-barrel price of oil adds an estimated C$26 million to AC's annual fuel expense, the airline claimed. "Fuel is the carrier's single largest expense item, accounting for more than 30% of total operating expense, and at current price levels will cost the airline close to C$1 billion more in 2008 than in 2007," it said. At current fuel prices and capacity levels, AC said it spends an average of C$230 in fuel to carry one passenger on a roundtrip journey, up from C$146 in 2007 and C$110 in 2004. In the six-month period beginning Oct. 1, AC plans to reduce domestic capacity by 2%, US transborder capacity by 13% and international capacity by 7%. It will suspend Toronto-Rome Fiumicino and Vancouver-Osaka flights from Oct. 26. It now expects full-year 2008 capacity to range from a 1% decrease to a 1% increase, down from the 2.5% full-year ASM increase previously projected.