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YVRKid
17th Jun 2004, 22:36
I was reading an article in the National Post a few weeks back, and Robert Milton was quoted as saying, they're through the worst, and its all uphill from here. What is the deal with Air Canada? Is what Mr. Milton said true? And what about Deutsche Bank? They said they would finance if ACA came to a deal with CAW, which they did, or atleast tenativly, so does that mean Air Canada will get financing?

Thanks,
Matthew

P.S. Why is the AUTO workers union with AIR Canada?

CGTSN
4th Jul 2004, 23:09
CAW ( Canadian Auto Worker = http://www.caw.ca/index.asp ) is the union that rules for the ground agents,ticketing agents of AC.

CUPE is the union for the F/A's and ACPA is for the pilots.

Different departments w/ different unions :)

I have read articles lately about AC and they seem to have found some solutions.
Hope that helps! :)

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Air Canada restructuring plan draws praise from analysts



By ERIN POOLEY
From Friday's Globe and Mail


Analysts yesterday applauded Air Canada's C aggressive restructuring plan, with one suggesting the country's largest airline could be profitable in the third quarter of the year.


Late Wednesday, Air Canada unveiled a plan of arrangement that calls for cutting its fleet size and operating with smaller planes in order to cut costs and increase efficiency. The embattled airline would emerge from bankruptcy protection with a leaner work force, and modified work rules and labour contracts. It also projects revenue increases of 6 per cent this year and 3 per cent in 2005.


"I wouldn't be surprised if they report profits for this year for second and third quarter. But this will be profit prior to one-time expenses and writeoffs," said Fred Lazar, a professor at York University's Schulich School of Business. "Excluding those, I think the company might report a profit for second quarter and, if not, it will definitely report a profit for third quarter.


"I think they're entirely capable of executing the plans quite well. Everything seems to be in place if they have a favourable economic environment. Two or three years from now, everyone will be looking back and saying the company did an excellent job of turning itself around and they're going to be a long-term winner."


The airline unveiled its long-awaited plan and information circular, which outlined plans to pare its fleet size by 30 planes by 2006 and phase out its larger jets by 2005.


Air Canada has also postponed wage negotiations with its unions until at least 2006 and cancelled all scheduled bonus payments and wage increases.


Under the restructuring, it is projecting a 4-per-cent increase in flying capacity for 2004 and a less than 1-per-cent increase in 2005.


Total revenue for 2004 is projected at $8.9-billion, with $9.1-billion the following year.


"I have no problems with those targets. I think the revenue numbers they'll be able to do, but I don't know if they'll be profitable," Jacques Kavafian, an airlines and aerospace investment analyst with Octagon Capital Corp., said yesterday.


The cost-cutting moves, together with Air Canada's new business strategy, are designed to allow the airline to emerge from bankruptcy protection on Sept. 30. It was granted protection under the Companies' Creditors Arrangement Act on April 1 of last year.


x "They're definitely on target for that revenue growth. They may even exceed it. I think the revenue projections are even a bit conservative," said Mr. Lazar, the York professor. "However, what's going to happen in the economy over the next couple of years — are there going to be any shocks or another terrorist attack? These are unknowns. Assuming there's going to be some relative stability in the business ..... they should do better than their revenue projection."


In its plan, filed with the Ontario Superior Court, Air Canada discusses risk factors, such as future terrorist attacks, competition from discount carriers and rising fuel and insurance costs.


It warns, however, that if the plan is not implemented, "bankruptcy of the applicants and forced sale or liquidation of their assets appear to be the likely consequence."


The airline has already chopped hundreds of millions of dollars in supplier costs, interest payments and aircraft rent from its budget.


Air Canada's creditors are to vote on the plan of arrangement at a meeting in Montreal Aug. 17. An Air Canada official has said July 9 is the deadline for unions to ratify labour pacts geared to helping the airline cut costs, although a snag has surfaced with mainline pilots whose union has suspended the vote in a dispute over the allocation of regional aircraft. Union officials couldn't be reached yesterday.


"Did they get enough from their union?" Mr. Lazar asked. "I suspect not ..... but if the company is given enough flexibility in terms of the use of people, then maybe going forward that would be sufficient."


In addition to reducing its operating fleet — not including aircraft from its regional subsidiary Jazz — the airline said it will phase out its 747 jets by 2005. It also plans to introduce a fleet of smaller regional jets to replace its CRJ-200 Bombardier aircraft.


Air Canada is eyeing an operating fleet of 199 aircraft as of Dec. 31, down from the 213 it had in operation as of March 31. The operating fleet would fall to 193 by the end of 2005 and to 183 by the end of 2006, before rebounding to about 200 planes at the end of 2007.


"That could be enough," said Mr. Kavafian, referring to the airline's planned fleet reductions. "The market is fairly strong this year."


Jazz's fleet will have 93 aircraft in operation at the end of this year, up from 91 at the end of March. Its fleet rises, however, to 111 aircraft at the end of 2005, to 131 at the end of 2006 and back down to 125 at the end of 2007.


Smaller aircraft with lower trip costs are expected to enable Air Canada to compete more effectively with low-cost carriers such as WestJet and Jetsgo, the report said.
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And this another interesting article :

Air Canada releases proposed business plan


FROM CANADIAN PRESS

Air Canada released late Wednesday its long-awaited plan detailing how it hopes to operate profitably after its restructuring - including a reduced mainline fleet of smaller aircraft, several thousands fewer workers and no negotiations with unions on wages until at least 2006.
"The foundation of the new business plan is a competitive cost structure," Air Canada says in the plan, which includes ambitious forecasts of operating profits reaching as high as $1.6 billion in 2005.

Creditors - who according to the plan could get as little as six cents for every dollar they claimed they were owed in the form of equity in the new, restructured company - will meet Aug. 17 to vote on the plan. Air Canada hopes to emerge from bankruptcy protection on Sept. 30.

The documents released Wednesday show Air Canada's workforce, including Jazz, was reduced to 32,986 as of March 31, down from 39,319 on March 31, 2003, just before it sought court protection under the court protection of the Companies' Creditors Arrangement Act last year.

The plan also shows Air Canada is eyeing an operating fleet - including Zip, but not including those from its Jazz subsidiary - of 199 aircraft as of Dec. 31, down from the 213 it had in operation as of March 31. The plan sees the operating fleet falling to 193 by the end of 2005 and 183 by the end of 2006, before rebounding to about 200 planes at the end of 2007.

However, Air Canada says it will fly to new international destinations, and at the same time "maintain frequency on key domestic and trans-border markets" by altering the use of its aircraft. It also said it will reduce its capacity in domestic markets "through the increased use of smaller regional jet aircraft."

Its handful of 747s will be phased out completely by 2005. It's also introducing ERJ-100s - smaller Embraer regional jets - to replace its CRJ-200 Bombardier regional jets, mostly by the end of 2006.

"These smaller aircraft with lower trip costs are expected to enable Air Canada to compete more effectively with low-cost carriers," the company explains.

Jazz's fleet will have 93 aircraft in operation at the end of this year, up from 91 at the end of this past March. Its fleet rises, however, to 111 aircraft at the end of 2005 and to 131 at the end of 2006, falling back down to 125 at the end of 2007.

The new Air Canada holding company plans to establish several of its units as stand-alone businesses.

In addition to regional subsidiary Jazz and online travel business Destina.ca which are already established as on their own, Air Canada plans to spin off its Technical Services, Cargo and Groundhandling operations into separate businesses or limited partnerships.

Air Canada (TSX: AC) needed significant cost cuts and had to secure major financing agreements in order for it to emerge from restructuring. It has reached tentative deals with all of its unions on labour cost reductions and restructured its aircraft leases, and with the acceptance of the Cerberus proposal has met its financing target.

The company is forecasting improved "EBITDAR" - earnings before interest, taxes, depreciation, amortization and rent - due to its lower cost structure. Those operating profits are forecast at $1.1 billion for 2004 - up $400,000 from 2003 - on revenues of $8.9 billion, up 6.3 per cent from last year.

Operating profit projections for 2005 are estimated at $1.6 billion on revenue of $9.1 billion.

As for unionized Canadian employees - who after two rounds of negotiations accepted more than $1 billion in labour cost concessions - their new collective agreements won't expire until 2009, according to the plan. However, they will be able to renegotiate wages in 2006.

In late June, Air Canada accepted a $250-million investment proposal from New York firm Cerberus Capital Management for a stake in the struggling airline, putting in place one of the final pieces needed for it to complete its restructuring under bankruptcy protection by Sept. 30. The investment, in addition to the $850 million raised through an equity offering to be underwritten by Deutsche Bank, brought the total equity raised by Air Canada to $1.1 billion.

According to the plan, unsecured creditors will exchange their claims for just under 46 per cent of the equity in the new company. Those same creditors will have a right to purchase from an additional 42 per cent stake in the airline that will be underwritten by Deutsche Bank.

The Cerberus stake will amount to about nine per cent. Three per cent will be held by Air Canada executives through a new stock option plan.

And as expected, common shareholders will get virtually nothing - just 0.01 per cent of existing common shareholders will get any new equity.

Creditors were claiming they were owed more than $100 billion during the restructuring process. That amount was being whittled down in restructuring, and according to the plan, if there are proven claims of only $15 billion, creditors will end up with 6.17 cents for every dollar they were owed in the form of shares. Claims of $10 billion would give them 9.25 cents for every dollar.