Is Air Canada dead?

[palebird]

AC will not be around for much longer if the creditors pull the plug. Their cash situation is great if there are no substantial debts. But that is Air Canada's problem. And $1 billion will not make it go away. There is no way out except for a major investment by someone. Li has walked away and GE is looking at pulling their backing out by month end. Once it starts the domino effect takes over. Look out. Major players at the top of AC are jumping ship. They see the writing on the wall. VP of maint walked as did the man under him. VP of Ops is going to walk. Miltons right hand man walked.

[Tan]

Palebird

Don't believe everything that the media says as more then often they form their opinions on speculation..

"The union advisors have saids that a large complex international restructuring will usually take up to two years. Their best estimate now is "before the end of the year". As the Air Canada restructuring is one of the largest and most complex in Canadian history, even this time line may be optimistic.

AC has confirmed that the forward bookings pattern is steady. We are informed that, "...things look fine. There's no melt down". Air Canada has about $900 million of cash on hand, available debt financing of about $500 million and is now operating with positive cash flow from operations. This will enable it to operate normally for as long as it takes to complete the new equity financing and exit from CCAA.

The key creditors, Deutsche Bank and GE Capital, have accepted there will be a new equity process and they will continue in the respective roles they had before. There appears to be no panic or great concern among key players including Justice Farley and that there will be a further stabilizing as the new equity process develops."

[skyhawk1]

What's your point Tan? Everything you just posted was what media and union groups are saying. And you said at the top of your post - that kind of stuff is their own kind of speculation.

You keep living in your little deamworld, but A/C is finished once GECAS walks. And they ARE going to walk. (unless some mirical happens and A/c finds an investor by April 30)

[Tan]

skyhawk1

Sorry but AC has been around for 67 years and will probably be around for quite a few years yet. I didn’t realize that you had the inside track as who was going to walk maybe you also have some good stock tips. Leasing companies don’t walk easily nowadays when there’s over 1000 jets parked in the desert most of them wide body. Besides which I chose to believe the experts who do have the inside track..

[palebird]

All I can say is I hope you are right. But my gut feeling is you are wrong. I am on layoff status and from what I have seen at AC they should go under in order to clean out all the bottomfeeders that drag that company down.

[Ralph Cramden]

Sorry Tan
AC has been around for 67 years on tax payers backs. I think this is unlikely to continue. Unions have to back off or it's lights out. RIP.

[fatbus]

The summer is coming and anyone can fill airplanes in the summer even AC. Nothing will happen until end of summer when the money stops coming in. My guess is big changes in the fall. AC has just posted their summer shed and they are hitting the big cash routes.I think that shed takes effect May 1.

[Well thats Me]

Out of the ashes something will arise,you only have to look at posts like below to know the entire things run as a state owned club and it goes to show what happens when a badly run airline takes over a better one,reminds me a bit of BA and BCAL, now theres a thing!.



"Customer Experience

Steve Smith, formerly President, ZIP Air Inc., assumes responsibility for the Customer Service group as Senior Vice President, Customer Experience. Norbert Manger, Vice President, Airports and Brad Moore, Vice President, Customer Service (responsible for In-Flight Service, Call Centres, Customer Solutions and Service Strategy) will report directly to Mr. Smith.

Operations

Rob Reid, Acting President and Chief Executive Officer, Air Canada Technical Services (ACTS) and Vice President System Operations Control (SOC), is appointed Senior Vice President, Operations with responsibility for ACTS, SOC, Flight Operations, Air Canada Maintenance and Flight Safety. Captain Rob Giguere, formerly Executive Vice President, Operations is currently considering various future options.

Commercial

Bill Bredt, formerly Vice President, Network and Revenue Management is appointed to the position of President, ZIP, Ben Smith, formerly Senior Director Network Planning, is appointed Vice President, Planning. Both report directly to Montie Brewer, Executive Vice President, Commercial.

Corporate Affairs

Duncan Dee, formerly Vice President, Corporate Affairs is appointed Senior Vice President, Corporate Affairs. In addition to his current responsibilities, Mr. Dee will assume responsibility for Corporate Security & Risk Management and Safety & the Environment.

Yves Dufresne, formerly Senior Director, International Affairs, is appointed Vice President, International and Regulatory Affairs with responsibility for Air Canada's international and alliance activities. Mr. Dufresne will report to Mr. Dee.

In addition, Lise Fournel, CIO and President, Destina, will also report to Mr. Dee.

John Baker, Senior Vice President and General Counsel and Paul Letourneau, Vice President and Corporate Secretary will now report directly to the President and CEO.

[Tan]

Ralph Cramden

Your quote:
"AC has been around for 67 years on tax payers backs"

Sorry Ralph but that myth has been around a long time, despite the fact AC returned a profit to the treasury the majority of the time. This is in spite of AC been forced to carry out disastrous government policy which is the major reason for the crisis today..

[STC]

The only way Air Canada can turn a profit is if it has an unfair competitive edge and a near monopoly. This was the case when Air Canada was a Crown corporation. The "profit to the treasury" mentioned was on the backs of the rest of the industry and the public at large, so the "myth" isn't too far from the truth.

Is Air Canada on its last legs? I certainly hope so. Air Canada is singularily responsible for the destruction of the Canadian airline industry and it just needs to go away.

[Tan]

STC

These are the facts unlike your myth:

Air Canada
A financing and profit history
· Air Canada has not received subsidies from any government since 1962
· Air Canada received government subsidies between the years 1937 and 1962. These subsidies totaled $25.6 million and were provided to cover shortfalls in the company's operating surplus account.
· During these years, the airline generated operating surpluses of $11.2 million, which was returned to the government.
· From 1963 to 1977 Air Canada returned $2.75 million to the government as dividends. At the same time, $38.7 million was accumulated as retained earnings.
· In 1974, the government committed to building a hangar in Winnipeg as part of an election promise. The government paid the $14 million capital cost and the operating costs of the hangar until Air Canada put it into full operation at which time the airline assumed the full operating costs of the building.
· In 1978, the government converted $24 million of outstanding loans to Air Canada, into equity, which eventually was repaid to the government, (the taxpayers) during privatization.
· The remaining $311 million of debt owed to the Federal government has been largely repaid, ($16.6 million was outstanding as of 1993), including interest charges on outstanding balances at market rates.
· In 1988, the Federal government, under Brian Mulroney, completed the first phase of the privatization of Air Canada. Air Canada received the proceeds of the first offering, which was $246 million.
· In 1989, the final 57% of Air Canada was privatized. A total of $493 million was raised and went to the government. That money not only paid off the government's 1978 equity investment in Air Canada, but also provided the government with an additional $164 million.
· Over Air Canada's 55 year, history, it has received a total of $679 million in loans and equity from the government but has returned $986 million to the government, (the Canadian taxpayer) in dividends, interest and capital repayments.
· The only outstanding loan to Air Canada from the Federal government was paid back in full as of April 1993.
· When Air Canada privatized it re-structured. Employee numbers went from just under 24,000 to just over 27,000. It bought new Airbus aircraft, making it the youngest, quietest fleet of any major carrier. Air Canada dealt with money-losing routes and pursued lucrative markets on a timely basis, especially the US. It has since grown to almost 33,000 employees again.

Note - The relatively small amount of debt that remained in 1993 was repaid soon afterwards.

[skyhawk1]

Hey Tan,
I got an iceberg to sell you...............

[PaperTiger]

Air Canada is singularily responsible for the destruction of the Canadian airline industry

I appreciate that it is hard to be dispassionate when you're personally affected, and recent history tends to obscure the bigger picture. Seems to me the Canadian airline industry pretty much self-destructed.

Not so long ago, it was in reasonable shape - EPA, Quebecair, Nordair, Transair, PWA and of course the transcons. No-one was making money hand-over-fist but all appeared comfortable in their markets. Then Max Ward decided to be a player too. CP's response was a frenzy of acquisition/meger culminating in the disastrous over-priced buyout of Wardair itself. Then to top it all they decided to challenge AC's deep pockets in a no holds barred fare war. Did AC match the fares ? You bet - that's Airline Economy 101.

I may be old with a flawed memory, but I don't recall AC wanting to absorb CP. Didn't Cullinette make them ? Smart (but painful) thing to have done would be let PWA Corp go under, then AC would still have got the benefit of a 'monopoly' but without the baggage of a takeover. Just MHO.

[Tan]

PaperTiger

That's a pretty accurate historical account of what went on..

I'm always amazed at how the "myths" in life tend to be believed rather then the facts.

[29chev]

Air Canada Announces Revised Agreement With Deutsche Bank For $850 Million Rights Offering
MONTREAL, April 26 /CNW Telbec/ - Air Canada announced today that it has
reached an agreement in principle with Deutsche Bank AG to amend the Stand-By
Purchase Agreement to extend and increase the rights offering available to
creditors from $450 million to $850 million. The $850 million rights offering
is greater than the $700 million originally sought by the Company at the start
of the equity solicitation process in July 2003. The agreement is subject to
completion of appropriate documentation and Court approval.
"Air Canada's restructuring regains its momentum today with a vote of
confidence in our restructuring business plan from a major global financial
institution," said Air Canada CEO Robert Milton. "The agreement with Deutsche
Bank will provide a solid foundation for Air Canada's restructuring and the
flexibility to pursue an equity partner as we work towards a successful
completion of the restructuring in the coming months.
"Air Canada is well positioned to carry on business effectively and it is
business as usual for our customers. We have made significant progress in
revenue, fleet and cost restructuring over the past year and our 2004 revenues
are tracking in line with what we projected in our business plan. We are now
entering our strongest travel period of the year, with positive cash flow and
approximately $1 billion in cash on hand as of the close of business last week
in addition to $500 million in available credit lines unchanged from the most
recent update.
"Our stakeholders, including our largest creditors, have reaffirmed their
support in ensuring the airline's successful restructuring and will continue
to work with us to ensure Air Canada emerges from CCAA protection a much
stronger airline," said Mr. Milton.
Under the proposed amendments, the previously announced $450 million
rights offering to creditors will be expanded to $850 million at the same
$925 million pre-investment valuation of Air Canada as had been provided in
the Trinity Agreement thus preserving and expanding a key element of potential
creditor recovery in Air Canada's restructuring plan.
Deutsche Bank as Stand-by Purchaser will acquire any equity not purchased
by creditors at a premium price of 107.5% thus ensuring that AC will have the
full $850 million available to fund its restructuring plan.
Air Canada will pursue an equity solicitation process. However, as a
result of the funding that the proposed amendments will secure, Air Canada
will be seeking only $250 million instead of the $650 million provided for in
the Trinity Agreement. This equity will be used in part to retire the GE
convertible notes and warrants if appropriate arrangements can be negotiated
with GE similar to those formerly negotiated by Trinity. However, successful
completion of the proposed equity investment will no longer be a condition
precedent to Air Canada's successful emergence from CCAA.
In addition to documentation and Court approval, the proposed amendments
contain two significant conditions regarding labour and pension matters which
must be satisfied by May 15, 2004. The labour condition requires that Air
Canada obtain $200 million in annual cost reductions to realize the labour
cost savings of approximately $1.1 billion agreed to by the various Air Canada
unions last year. In addition, the agreement requires that Air Canada's labour
unions provide "clean slate" assurances that all material disputes or claims
will be compromised or waived upon emergence. The pension conditions require
Air Canada to reach satisfactory arrangements with the Office of the
Superintendent of Financial Institutions (OSFI) to implement the February 18,
2004 agreement between Air Canada and its pension beneficiaries regarding
funding over 10 years of the solvency deficit in Air Canada's pension plans.
The proposed amendments do not require pension design changes as had
previously been required by equity plan sponsors.
In addition, the agreement requires satisfactory assurances from the
Government of Canada that, upon emergence, Air Canada will be able to compete
on a level playing field with all Canadian carriers in regards to the
regulatory environment.
The timeline for the equity solicitation process remains under discussion
and will be subject to approval by the Court. However, the amended agreement
will provide for Air Canada to emerge from CCAA protection no later than
September 30, 2004.

[colegate]

Canada has been a graveyard for airlines for the last decade. It remain thus until the capacity in the market has been cut drastically.

In customer service terms Canada had produced some excellent airlines. Wardair, to my mind, was very highly related. But it expanded far too rapidly towards its end.

Air Canada cannot possible comptetre with all comers in Canada. It should surely retrench around hubs in YTO, YUL and YVR. Good hub scheduling with good long haul connections at all three. Forget the rest. It is being dragged down by domestic point to point competition which it can never match on cost or ticket prices.

[STC]

Tan,

Here is the brutal reality. No matter how many twisted stats you write, there is no arguing that since privatization, Air Canada has been transformed from a debt free, asset rich corporation to bankruptcy protection, while maintaining the majority share of the market.

Their multi-billion dollar debt wouldn't be tolerated in most economies where they would have been put out of their misery long ago.

Furthermore, Air Canada used predatory pricing to kill off other airlines. Remember, predatory pricing is offering service below cost in an effort to drive competitors into the red. Predatory pricing is a poor business practice that has effectively injured Air Canada and the rest of the industry.

And please, let’s let go of that whole “Air Canada was forced to absorb Canadian” crap. In absorbing Canadian, Air Canada got exactly what it wanted. A near monopoly and lucrative Pacific Rim routes.

This theory is just as flawed as the one about how “poor” Air Canada is forced to maintain service into small cities. A quick look at the current schedule should reveal the myth….

[PaperTiger]

In absorbing Canadian, Air Canada got exactly what it wanted. A near monopoly and lucrative Pacific Rim routes.

Not quite exactly what it wanted. Several thousand unnnecessary employees for example. And AC was free to fly to Asia without needing to absord CP (although the 744s did come in handy). Look up the definition of deregulation.

[STC]

I'm quite aware of what deregulation entails. Now you can look up the word "monopoly" Paper Tiger.

Although Air Canada could have infiltrated the PacRim, its much easier if there is no competition.