North Saanich-based Viking Air Ltd. is cutting production and laying off 116 employees, saying some of its customers are unable to pay for aircraft they have ordered and the pace of future sales is slowing.

The company, which manufactures Twin Otter aircraft at facilities in North Saanich and Calgary, announced Thursday it is cutting its staff to 432 people.

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About 100 people are being laid off at Viking’s operation in North Saanich.

“This is a last resort — you don’t make these kinds of decisions quickly,” Viking president Dave Curtis said in an interview.

Curtis said he met with Viking staff a month ago and told them he would make a decision about production in 30 days. That deadline came Thursday and layoffs took effect immediately.

Employees in most departments are affected, but not in maintenance or sales, Curtis said. The biggest impact is being felt on the production side, where 74 unionized employees are being let go.

Viking’s production will be trimmed to 18 aircraft in a year from the current pace of 24.

The layoffs were blamed on a softening Russian market and a global slowdown in the oil and gas sector. Curtis said if there was one major factor that tipped the scales, it was Russian economic woes.

“We forecast we would sell 100 airplanes there over the next 10 years. But we now have customers who have aircraft on order that we are producing and some of them haven’t been able to meet their financial commitments to us,” he said.

“It’s one thing not to sell another airplane, but when they are not able to take the airplanes they have already ordered, you kind of take the hint you have to make an adjustment.”

Viking is storing a few aircraft that fall into that category. Those aircraft are 80 to 90 per cent paid for, Curtis said, but “until they meet the entire commitment to us, we don’t deliver.”

Curtis stressed every plane the company starts producing has been partially paid for and is under contract.

“We do not build on spec,” he said. “None of the aircraft we have parked are unsold.”

In the slumping energy sector, a number of customers have deferred buying until conditions improve.

Unifor Local 114, which represents Viking’s unionized workers, is having trouble coming to terms with Thursday’s decision.

“Shock is probably the most accurate word for it,” said Stu Shields, Unifor national representative. “We knew orders had declined and we were outside of the sweet spot in terms of the manufacturing schedule.”

Shields said while he understands the decision, the union is disappointed the company continues to honour contracts with outside suppliers for components when that work could have kept workers on the manufacturing line.

“They had contracted out work that couldn’t be done at the plant, as it was close to being maxed out,” Shields said.

“But it sounds like what they had done is enter into longer-term contracts for these contractors, and now with sales falling off, everyone at the plant is qualified to do the work, but [Viking] can’t get the work back.”

Shields said workers have been given 60 days’ pay in lieu of notice and the company will help workers find new jobs.

“There is some demand, but in aerospace, there is a lot of specialization. It’s not like a mechanic is a mechanic is a mechanic,” he said.

“So it will be a little more difficult to find homes for these people.”

Curtis said he remains confident in Viking’s prospects for Chinese certification, which is expected in coming weeks. The certification means the company will be able to sell in China.

Since Viking brought the Twin Otter back into production — the first was delivered in 2010 — the plane has generated more than $400 million for the company.

The aircraft, with a base price of about $7 million, has been sold and delivered to 27 countries. Viking has orders that will carry it for the next 12 months. It has taken more than 100 orders for aircraft and delivered 68.

aduffy@timescolonist.com