Is Air Canada dead?
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AC Reply to Trinity Announcement
Air Canada to Pursue Alternatives to Trinity Investment; Business as Usual for Air Canada's Customers
MONTREAL, April 2 /CNW Telbec/ - Air Canada said today that while it
regrets today's decision by Trinity Time Investments Limited to not seek
extension of its Investment Agreement beyond April 30, 2004, it remains
focused on completing its restructuring and emerging successfully from CCAA
protection as soon as possible. As a result of Trinity's announcement, Air
Canada is free to pursue alternative equity financing arrangements and is
doing so. In that regard, Air Canada has contacted General Electric Capital
Corporation and Deutsche Bank Securities, both of whom have substantial
financing commitments to the Corporation to discuss alternatives resulting
from Trinity's announcement.
"Our restructuring has become more challenging as a result of record high
fuel prices, increased domestic capacity by our low cost competitors and the
geopolitical issues faced by the airline industry as a whole," said Robert
Milton, President and Chief Executive Officer. "However, our 2004 revenues are
tracking in line with what we projected in our business plan last October
during the equity solicitation process. We are seeing year over year unit cost
declines in the range of 14 per cent. Our cash balances are healthy with over
$900 million in cash on hand and close to another $500 million of additional
credit available. We have made major progress on important aspects of our
restructuring, including a significant fleet, debt and lease restructuring,
major reductions in supplier arrangements and changes to our fare structures
and distribution channels.
"Trinity's announcement expressly states that investment in Air Canada
remains a possibility if circumstances change sufficiently to meet the
concerns identified by Trinity, especially relating to arrangements with Air
Canada's labour unions. We are well positioned to carry on business
effectively while considering the concerns raised by Trinity as well as
alternative equity arrangements. We trust that our unions and other
stakeholders will recognize the urgency of resolving the remaining obstacles
to our exit from CCAA, particularly since the arrangements with GE and
Deutsche Bank also expire at the end of April, unless extended by agreement.
"I want to reassure our customers and employees that it's business as
usual at Air Canada as it has been throughout our restructuring, especially as
we go into our strongest travel period of the year, with very strong liquidity
levels.
"The stakeholders in Air Canada's restructuring, including our largest
creditors have reconfirmed their support in ensuring the airline's survival.
The progress achieved in Air Canada's restructuring to date clearly justifies
our continued resolve to overcome this latest challenge."
The Air Canada Ad Hoc Unsecured Creditors Committee has indicated that it
is disappointed with the adverse developments in the Trinity equity
initiative. At the same time, the UCC confirmed its desire to continue to work
with Air Canada management and the Monitor to establish an appropriate new
equity solicitation process as a component of a successful restructuring and
emergence from CCAA, subject to the satisfactory resolution of the fundamental
issues that adversely affected the Trinity Time initiative.
In addition, GE, the corporation's largest aircraft lessor and exit
financing lendor, has indicated that given the dynamic competitive environment
in the airline industry, its priority remains the successful completion of the
CCAA process as soon as possible. GE has indicated that it is supportive of
management's efforts to find constructive solutions and is committed to
working with Air Canada and to maintain an open dialogue with all stakeholders
to find an urgent resolution.
"When we announced our restructuring one year ago, we predicted that the
task before us would be painful and the challenges daunting. We have clearly
reached the point where our unions and the employees they represent need to
voice loudly and clearly that there is a will and a way to ensure our cost
competitiveness and convince Victor Li or any other investor that Air Canada's
people accept that the world has changed.
"The year has been particularly difficult for our employees and I thank
them for their hard work and dedication in taking care of our customers whose
continued support has been heartening.
"The remaining hurdles are surmountable and with goodwill and cooperation
on the part of all parties, I remain convinced Air Canada will emerge from
CCAA protection a much stronger airline," concluded Mr. Milton.
MONTREAL, April 2 /CNW Telbec/ - Air Canada said today that while it
regrets today's decision by Trinity Time Investments Limited to not seek
extension of its Investment Agreement beyond April 30, 2004, it remains
focused on completing its restructuring and emerging successfully from CCAA
protection as soon as possible. As a result of Trinity's announcement, Air
Canada is free to pursue alternative equity financing arrangements and is
doing so. In that regard, Air Canada has contacted General Electric Capital
Corporation and Deutsche Bank Securities, both of whom have substantial
financing commitments to the Corporation to discuss alternatives resulting
from Trinity's announcement.
"Our restructuring has become more challenging as a result of record high
fuel prices, increased domestic capacity by our low cost competitors and the
geopolitical issues faced by the airline industry as a whole," said Robert
Milton, President and Chief Executive Officer. "However, our 2004 revenues are
tracking in line with what we projected in our business plan last October
during the equity solicitation process. We are seeing year over year unit cost
declines in the range of 14 per cent. Our cash balances are healthy with over
$900 million in cash on hand and close to another $500 million of additional
credit available. We have made major progress on important aspects of our
restructuring, including a significant fleet, debt and lease restructuring,
major reductions in supplier arrangements and changes to our fare structures
and distribution channels.
"Trinity's announcement expressly states that investment in Air Canada
remains a possibility if circumstances change sufficiently to meet the
concerns identified by Trinity, especially relating to arrangements with Air
Canada's labour unions. We are well positioned to carry on business
effectively while considering the concerns raised by Trinity as well as
alternative equity arrangements. We trust that our unions and other
stakeholders will recognize the urgency of resolving the remaining obstacles
to our exit from CCAA, particularly since the arrangements with GE and
Deutsche Bank also expire at the end of April, unless extended by agreement.
"I want to reassure our customers and employees that it's business as
usual at Air Canada as it has been throughout our restructuring, especially as
we go into our strongest travel period of the year, with very strong liquidity
levels.
"The stakeholders in Air Canada's restructuring, including our largest
creditors have reconfirmed their support in ensuring the airline's survival.
The progress achieved in Air Canada's restructuring to date clearly justifies
our continued resolve to overcome this latest challenge."
The Air Canada Ad Hoc Unsecured Creditors Committee has indicated that it
is disappointed with the adverse developments in the Trinity equity
initiative. At the same time, the UCC confirmed its desire to continue to work
with Air Canada management and the Monitor to establish an appropriate new
equity solicitation process as a component of a successful restructuring and
emergence from CCAA, subject to the satisfactory resolution of the fundamental
issues that adversely affected the Trinity Time initiative.
In addition, GE, the corporation's largest aircraft lessor and exit
financing lendor, has indicated that given the dynamic competitive environment
in the airline industry, its priority remains the successful completion of the
CCAA process as soon as possible. GE has indicated that it is supportive of
management's efforts to find constructive solutions and is committed to
working with Air Canada and to maintain an open dialogue with all stakeholders
to find an urgent resolution.
"When we announced our restructuring one year ago, we predicted that the
task before us would be painful and the challenges daunting. We have clearly
reached the point where our unions and the employees they represent need to
voice loudly and clearly that there is a will and a way to ensure our cost
competitiveness and convince Victor Li or any other investor that Air Canada's
people accept that the world has changed.
"The year has been particularly difficult for our employees and I thank
them for their hard work and dedication in taking care of our customers whose
continued support has been heartening.
"The remaining hurdles are surmountable and with goodwill and cooperation
on the part of all parties, I remain convinced Air Canada will emerge from
CCAA protection a much stronger airline," concluded Mr. Milton.
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I note that Air Canada also announced that they had posted a loss of $1.9billion for the year. How long can they keep going making losses of this magnitude?. I cannot see anyone wanting to invest with losses like this. I also note that some large debt are coming up for repayment soon and unless they can get agreement on restructuring these, things could get messy.
It might be a better option to let them fall and allow smaller, leaner operations to come to the fore. This might be a painful option for Canada and the Canadian people but it might be the best option in the long run.
It might be a better option to let them fall and allow smaller, leaner operations to come to the fore. This might be a painful option for Canada and the Canadian people but it might be the best option in the long run.
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Is Air Canada dead?
Li walks from plan to rescue Air Canada
By JOHN PARTRIDGE,PAUL WALDIE, ANDREW WILLIS,SIMON TUCK
From Saturday's Globe and Mail
POSTED AT 12:28 AM EST Saturday, Apr. 3, 2004
Air Canada's long, troubled rescue began unravelling Friday as Hong Kong businessman Victor Li signalled that he is walking away from his planned $650-million investment because of the insolvent airline's uncertain financial prospects and a confrontation with labour unions.
As Canada's biggest airline began looking for another investor, both it and its unions reassured travellers that operations would not be affected and they would not be left stranded.
Observers, however, warned that liquidation of the airline is a possibility after Friday's developments.
As the restructuring deal came undone — a year and a day after Air Canada was granted court protection from its creditors — the betting on the sidelines was that any new investor would demand a far steeper price than Mr. Li, and any new deal could cost chief executive officer Robert Milton and chief restructuring officer Calin Rovinescu their jobs, as well as the contentious $21-million in bonuses each was in line to receive.
But there was also widespread speculation among Air Canada's unions and elsewhere that Mr. Li's Trinity Time Investments Ltd. may just be posturing and threatening to walk away simply in an effort to pressure the unions into making more concessions.
Trinity said it would not seek to extend its agreement with Air Canada beyond its April 30 expiry date and Air Canada was no longer obliged to deal with it exclusively.
"We are, of course, disappointed in this outcome," Trinity director and adviser Harold (Sonny) Gordon said in a statement released late Friday.
Labour cost and productivity savings promised by the unions are not being fully achieved, Mr. Gordon said, while the airline's financial outlook is not as good as expected because of record-high fuel costs and more competition.
The unions made concessions valued at about $850-million a year in restructuring negotiations last year, making up the bulk of $1.1-billion in annual cost savings Air Canada pledged to achieve.
As well, citing the unions' refusal to agree to changes Trinity wanted to make in the Air Canada pension plan, Mr. Gordon added: "We have concluded from this that without a change in the manner in which Air Canada's employees are organized and their interests [are] represented, Air Canada will not likely achieve a sufficient fresh start to prosper and grow in the competitive environment which it faces."
Mr. Gordon appeared to keep the door open a crack, saying Trinity has not ruled out "a continued participation if circumstances change sufficiently."
The announcement came as Air Canada disclosed that it had an operating loss of $684-million last year, and a final loss, including reorganization and restructuring charges, of more than $1.86-billion.
However, the company insisted it is business as usual, saying it has $900-million in cash on hand and nearly $500-million in additional credit available. "I want to reassure our customers and employees that it's business as usual at Air Canada as it has been throughout our restructuring," Mr. Milton said.
Air Canada said that as a result of Trinity's announcement, it is "free to pursue alternative equity financing arrangements and is doing so."
April 30 is also the expiry date for a pact under which GE Capital Aviation Services agreed to lend Air Canada $1.8-billion. A spokesman for the U.S. firm said that, although this deadline remains, its deal is "absolutely not" tied to Trinity's. "Our priority remains the successful emergence of Air Canada from this bankruptcy process and we're going to continue to support management's efforts," he said.
Federal Transport Minister Tony Valeri gave no hint that Ottawa is prepared to bail out Air Canada if another rescuer cannot be found.
"Today's developments underscore the need for the unions, the company and the investors to re-examine their positions and redouble their efforts," he said. "They all have a vested interest in seeing Air Canada succeed. We continue to have confidence that Air Canada will be able to serve Canadians now and find a long-term private-sector solution."
Meanwhile, some labour officials and industry observers speculated that Mr. Li may be threatening to walk as a bargaining tactic to get Air Canada's unions to agree to changes he is demanding be made to the company's pension plan but which they have refused to discuss.
"That doesn't say they pulled out, that just says they are not going to extend," said Gary Fane, national director for the transportation industry of the Canadian Auto Workers union. "It sounds like if all the unions got on their knees and said, 'Please let me give you more concessions,' then they may not leave.
"I'm not suggesting it's not serious," he said. "I'm suggesting that it doesn't surprise me. The end of the world is not coming yet."
The CAW represents about 7,500 of Air Canada's approximately 30,000 employees.
Douglas Reid, strategy professor at Queen's University in Kingston, Ont., agreed Trinity's statement leaves plenty of room for a deal with Air Canada. "I don't interpret this as a walkaway story."
Mr. Milton did not rule out a deal with Mr. Li's firm, saying in an e-mail to Air Canada employees that he "will be seeking a meeting with all our union leaders to determine if the willingness exists among our unions to try to convince Trinity to pursue their investment."
However, other sources said Mr. Li, the eldest son of Hong Kong billionaire Li Ka-shing, is going and will not be back.
"This is not posturing — it's real," said one person familiar with Trinity's thinking.
One investment banker who has worked with Air Canada for a number of years concurred. "Trinity can't really back down," he said. "You can't say we want X, Y and Z by April 30 or we walk, then let April 30 come and go and not walk. We're into the endgame."
A source close to Air Canada said it would take a "miracle" to get a deal with Trinity at this point.
The source added that Mr. Li felt personally insulted by remarks made by some labour leaders. He cited a March 5 meeting at which a union official told a Trinity negotiator: "You tell your Hong Kong billionaire to take his money back on the boat to China."
The source added: "That's just not the type of thing you say to a Chinese businessperson."
Among the potential substitutes for Trinity that Air Canada will likely approach are New York investment bank Cerberus Capital Management LP, which lost out to Mr. Li's company Trinity last year in the bidding to become the airline's major shareholder, and Texas Pacific Group (TPG) of Fort Worth, Tex. TPG made a joint proposal with Toronto-based Onex Corp. that did not make the short list.
Neither Cerberus nor TPG would comment on Friday.
By JOHN PARTRIDGE,PAUL WALDIE, ANDREW WILLIS,SIMON TUCK
From Saturday's Globe and Mail
POSTED AT 12:28 AM EST Saturday, Apr. 3, 2004
Air Canada's long, troubled rescue began unravelling Friday as Hong Kong businessman Victor Li signalled that he is walking away from his planned $650-million investment because of the insolvent airline's uncertain financial prospects and a confrontation with labour unions.
As Canada's biggest airline began looking for another investor, both it and its unions reassured travellers that operations would not be affected and they would not be left stranded.
Observers, however, warned that liquidation of the airline is a possibility after Friday's developments.
As the restructuring deal came undone — a year and a day after Air Canada was granted court protection from its creditors — the betting on the sidelines was that any new investor would demand a far steeper price than Mr. Li, and any new deal could cost chief executive officer Robert Milton and chief restructuring officer Calin Rovinescu their jobs, as well as the contentious $21-million in bonuses each was in line to receive.
But there was also widespread speculation among Air Canada's unions and elsewhere that Mr. Li's Trinity Time Investments Ltd. may just be posturing and threatening to walk away simply in an effort to pressure the unions into making more concessions.
Trinity said it would not seek to extend its agreement with Air Canada beyond its April 30 expiry date and Air Canada was no longer obliged to deal with it exclusively.
"We are, of course, disappointed in this outcome," Trinity director and adviser Harold (Sonny) Gordon said in a statement released late Friday.
Labour cost and productivity savings promised by the unions are not being fully achieved, Mr. Gordon said, while the airline's financial outlook is not as good as expected because of record-high fuel costs and more competition.
The unions made concessions valued at about $850-million a year in restructuring negotiations last year, making up the bulk of $1.1-billion in annual cost savings Air Canada pledged to achieve.
As well, citing the unions' refusal to agree to changes Trinity wanted to make in the Air Canada pension plan, Mr. Gordon added: "We have concluded from this that without a change in the manner in which Air Canada's employees are organized and their interests [are] represented, Air Canada will not likely achieve a sufficient fresh start to prosper and grow in the competitive environment which it faces."
Mr. Gordon appeared to keep the door open a crack, saying Trinity has not ruled out "a continued participation if circumstances change sufficiently."
The announcement came as Air Canada disclosed that it had an operating loss of $684-million last year, and a final loss, including reorganization and restructuring charges, of more than $1.86-billion.
However, the company insisted it is business as usual, saying it has $900-million in cash on hand and nearly $500-million in additional credit available. "I want to reassure our customers and employees that it's business as usual at Air Canada as it has been throughout our restructuring," Mr. Milton said.
Air Canada said that as a result of Trinity's announcement, it is "free to pursue alternative equity financing arrangements and is doing so."
April 30 is also the expiry date for a pact under which GE Capital Aviation Services agreed to lend Air Canada $1.8-billion. A spokesman for the U.S. firm said that, although this deadline remains, its deal is "absolutely not" tied to Trinity's. "Our priority remains the successful emergence of Air Canada from this bankruptcy process and we're going to continue to support management's efforts," he said.
Federal Transport Minister Tony Valeri gave no hint that Ottawa is prepared to bail out Air Canada if another rescuer cannot be found.
"Today's developments underscore the need for the unions, the company and the investors to re-examine their positions and redouble their efforts," he said. "They all have a vested interest in seeing Air Canada succeed. We continue to have confidence that Air Canada will be able to serve Canadians now and find a long-term private-sector solution."
Meanwhile, some labour officials and industry observers speculated that Mr. Li may be threatening to walk as a bargaining tactic to get Air Canada's unions to agree to changes he is demanding be made to the company's pension plan but which they have refused to discuss.
"That doesn't say they pulled out, that just says they are not going to extend," said Gary Fane, national director for the transportation industry of the Canadian Auto Workers union. "It sounds like if all the unions got on their knees and said, 'Please let me give you more concessions,' then they may not leave.
"I'm not suggesting it's not serious," he said. "I'm suggesting that it doesn't surprise me. The end of the world is not coming yet."
The CAW represents about 7,500 of Air Canada's approximately 30,000 employees.
Douglas Reid, strategy professor at Queen's University in Kingston, Ont., agreed Trinity's statement leaves plenty of room for a deal with Air Canada. "I don't interpret this as a walkaway story."
Mr. Milton did not rule out a deal with Mr. Li's firm, saying in an e-mail to Air Canada employees that he "will be seeking a meeting with all our union leaders to determine if the willingness exists among our unions to try to convince Trinity to pursue their investment."
However, other sources said Mr. Li, the eldest son of Hong Kong billionaire Li Ka-shing, is going and will not be back.
"This is not posturing — it's real," said one person familiar with Trinity's thinking.
One investment banker who has worked with Air Canada for a number of years concurred. "Trinity can't really back down," he said. "You can't say we want X, Y and Z by April 30 or we walk, then let April 30 come and go and not walk. We're into the endgame."
A source close to Air Canada said it would take a "miracle" to get a deal with Trinity at this point.
The source added that Mr. Li felt personally insulted by remarks made by some labour leaders. He cited a March 5 meeting at which a union official told a Trinity negotiator: "You tell your Hong Kong billionaire to take his money back on the boat to China."
The source added: "That's just not the type of thing you say to a Chinese businessperson."
Among the potential substitutes for Trinity that Air Canada will likely approach are New York investment bank Cerberus Capital Management LP, which lost out to Mr. Li's company Trinity last year in the bidding to become the airline's major shareholder, and Texas Pacific Group (TPG) of Fort Worth, Tex. TPG made a joint proposal with Toronto-based Onex Corp. that did not make the short list.
Neither Cerberus nor TPG would comment on Friday.
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Air Canada is 'toast'
analyst: Financial backer Trinity reopens bidding, still interested only if 'circumstances change'
Paul Vieira
Financial Post
Saturday, April 03, 2004
The collapse of Air Canada edged closer to reality yesterday after Victor Li, the insolvent company's prospective investor, said he has lost interest in the airline -- due to a poorer-than-expected balance sheet and intransigent unions -- and has freed the carrier to pursue another deal with a different equity partner.
The stunning statement from the Hong Kong-based businessman caps a wild day that saw the airline report its largest annual loss yet, of $1.86-billion or $15.53 a share for the 2003 fiscal year, more than double what it lost last year. Also, the national leadership of Air Canada's largest union took control of a local authority and suspended its executive team after that team negotiated a pension deal with the company.
The result of Mr. Li's latest threat means Air Canada has days to get its restructuring on track or face liquidation. The airline's stay under bankruptcy protection will expire on April 15, and the Ontario court wanted to see "significant progress" on the file before giving another extension.
One industry analyst said it's too late.
"The company is toast. It's finished," said Jacques Kavafian, an airline specialist at Octagon Capital, adding there's likely no other investor in the offing given the porous state of the airline's books...
...One union leader dismissed Trinity's statement, saying it was another round of brinkmanship.
"This is not going to prompt us to get on our knees and beg and give more money back," said Gary Fane, director of transportation for the Canadian Auto Workers, which represents ticket agents and call-centre employees...
http://www.canada.com/national/natio...8-a16df9c9367c
_________________________________________
Li and Air Canada unions inhabit different planets
By ERIC REGULY
Saturday, April 3, 2004 - Page B2
Air Canada took a big step toward oblivion last night when Victor Li's Trinity Time Investments said it's ready to walk away from the airline. The announcement was a threat, of course, but it was a real one because Mr. Li and most of the unions evidently inhabit different planets. "Air Canada's organized labour structures impair its ability to succeed," Trinity said.
Trinity was referring mostly to Air Canada's pension plan. The Canadian Auto Workers and other unions might not believe this, but unless the pension plan is fixed, the airline is dead, dead, dead. Think of it this way. When the airline emerges from bankruptcy protection -- no certainty now that Mr. Li's proposed $650-million investment is highly doubtful -- it will have about $7-billion of assets. The pension plan will have about $9-billion, less the $1-billion or so Air Canada owes it. So the pension plan will be bigger than the airline.
So what? The point is a plan of that relative size, whether fully funded or not, will always hang like Damocles' sword over the airline. It is no exaggeration to say the pension hole made Air Canada's crash landing in bankruptcy court a year ago inevitable. It is equally no exaggeration to say that, unfixed, the plan could come back to destroy Air Canada again and again...
http://www.theglobeandmail.com/servl...ess/Columnists
analyst: Financial backer Trinity reopens bidding, still interested only if 'circumstances change'
Paul Vieira
Financial Post
Saturday, April 03, 2004
The collapse of Air Canada edged closer to reality yesterday after Victor Li, the insolvent company's prospective investor, said he has lost interest in the airline -- due to a poorer-than-expected balance sheet and intransigent unions -- and has freed the carrier to pursue another deal with a different equity partner.
The stunning statement from the Hong Kong-based businessman caps a wild day that saw the airline report its largest annual loss yet, of $1.86-billion or $15.53 a share for the 2003 fiscal year, more than double what it lost last year. Also, the national leadership of Air Canada's largest union took control of a local authority and suspended its executive team after that team negotiated a pension deal with the company.
The result of Mr. Li's latest threat means Air Canada has days to get its restructuring on track or face liquidation. The airline's stay under bankruptcy protection will expire on April 15, and the Ontario court wanted to see "significant progress" on the file before giving another extension.
One industry analyst said it's too late.
"The company is toast. It's finished," said Jacques Kavafian, an airline specialist at Octagon Capital, adding there's likely no other investor in the offing given the porous state of the airline's books...
...One union leader dismissed Trinity's statement, saying it was another round of brinkmanship.
"This is not going to prompt us to get on our knees and beg and give more money back," said Gary Fane, director of transportation for the Canadian Auto Workers, which represents ticket agents and call-centre employees...
http://www.canada.com/national/natio...8-a16df9c9367c
_________________________________________
Li and Air Canada unions inhabit different planets
By ERIC REGULY
Saturday, April 3, 2004 - Page B2
Air Canada took a big step toward oblivion last night when Victor Li's Trinity Time Investments said it's ready to walk away from the airline. The announcement was a threat, of course, but it was a real one because Mr. Li and most of the unions evidently inhabit different planets. "Air Canada's organized labour structures impair its ability to succeed," Trinity said.
Trinity was referring mostly to Air Canada's pension plan. The Canadian Auto Workers and other unions might not believe this, but unless the pension plan is fixed, the airline is dead, dead, dead. Think of it this way. When the airline emerges from bankruptcy protection -- no certainty now that Mr. Li's proposed $650-million investment is highly doubtful -- it will have about $7-billion of assets. The pension plan will have about $9-billion, less the $1-billion or so Air Canada owes it. So the pension plan will be bigger than the airline.
So what? The point is a plan of that relative size, whether fully funded or not, will always hang like Damocles' sword over the airline. It is no exaggeration to say the pension hole made Air Canada's crash landing in bankruptcy court a year ago inevitable. It is equally no exaggeration to say that, unfixed, the plan could come back to destroy Air Canada again and again...
http://www.theglobeandmail.com/servl...ess/Columnists
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>>If they book AC via travel agent in Ireland, direct via phone or online, what will happen if AC folds as regards refunds?<<
Here's a FAQ about bankrupt airline ticket refunds in Canada:
http://www.cbc.ca/news/indepth/backg...0_refunds.html
It looks like in most cases people who purchase tickets join a long line of unsecured creditors. They may get some money back or if lucky, another airline may honor the tickets on a standby basis.
It is possible that the government will continue to support endless political airline bailouts. Canadian Airlines unions gambled and won on this a couple of years ago. Surely they wouldn't let Air Canada, the flag carrier and a former Crown corporation, go under? Or would they?
I wouldn't worry until they start using the phrase "business as usual"...
Here's a FAQ about bankrupt airline ticket refunds in Canada:
http://www.cbc.ca/news/indepth/backg...0_refunds.html
It looks like in most cases people who purchase tickets join a long line of unsecured creditors. They may get some money back or if lucky, another airline may honor the tickets on a standby basis.
It is possible that the government will continue to support endless political airline bailouts. Canadian Airlines unions gambled and won on this a couple of years ago. Surely they wouldn't let Air Canada, the flag carrier and a former Crown corporation, go under? Or would they?
I wouldn't worry until they start using the phrase "business as usual"...
Last edited by Airbubba; 4th Apr 2004 at 05:20.
It's gonna become a political football any day now. This country will be having a general election either early this summer or in the early fall. The current government won't let 'em go under, too many votes to lose in Montreal, Toronto and Winnipeg.
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air canada..... hum!
just to tell you that the unions have finally destroyed the airline... banch of STUPID guys that beleive they are untouchable!!!
guess what,..... we will see what will happen april 15th!
but in the meantime,..... with the election coming soon... they won't let the airline going under! too much to lose!
I can't see the country loosing around 200 000 jobs, .... Cara, fuel, the great Toronto airport... going bankrupt? I don't think so Tim!!! but they deserve... to receive a big kick in the butt!!
I'm just fade up!
ciao!
so they may be saved again ... but they desurve
guess what,..... we will see what will happen april 15th!
but in the meantime,..... with the election coming soon... they won't let the airline going under! too much to lose!
I can't see the country loosing around 200 000 jobs, .... Cara, fuel, the great Toronto airport... going bankrupt? I don't think so Tim!!! but they deserve... to receive a big kick in the butt!!
I'm just fade up!
ciao!
so they may be saved again ... but they desurve
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11 days is a long time in the negotiation business. What we're seeing here is the end game, none of AC, Trinity or CUAW have yet to lay their cards on the table. No doubt they all have their agendas pretty much set, but aren't going to be the first to reveal them. Nor for that matter will the government. A number of scenarios are possible, some of which have been aired and others only the principals have formulated. I have my own ideas but I'm no guru so I'll keep quiet, but I would bet (modestly) that there will be an Air Canada in some form this time next year.
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AC dead....
HI pagetiger,
so you think that they won't make it.... and something will emerge next year!?
why not I think everything is possible!
but with the election on the go... and the number of jobless person.... this going to be devastator for the canadian economy....
but will see 11 days to go!
cheers!
so you think that they won't make it.... and something will emerge next year!?
why not I think everything is possible!
but with the election on the go... and the number of jobless person.... this going to be devastator for the canadian economy....
but will see 11 days to go!
cheers!
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Looks like the unions have destroyed this airline finally......
just to tell you that the unions have finally destroyed the airline... banch of STUPID guys that beleive they are untouchable!!!
But I don't think it's fair or reasonable to automatically blame the unions (and the unions alone) for the fall of AC.
Quite aside from the arguement that the Union's have already agreed to (collectively) billions of dollars in cuts, ultimately the real concern here is Air Canada's ability to deliver up a realistic and deliverable business plan for the future, and the total lack of trust, respect and confidence the workforce has in AC's leadership.
Revenues are down, passenger loads are down, millions of dollars of investment went into initiatives such as Tango which has now been scrapped, some are questioning the effectiveness of low cost carrier Zip which has been running with load factors heavily below that of WestJet....
AC has turned to labour cuts and layoffs, they've cut so deep in some cases that they have been desperately short of ground staff, huge lines for check-in, not enough ramp personnel to go around leading to delays, customer dissatisfaction....
There is no doubt that in today's climate, airlines need to be 'streamlined' and cost-efficient.
Union's have a vital role to play in bringing (often outdated) contracts into some form of line so that the gap between the Low Costs, New Entrant and Charter carriers and the established former flag carriers like AC is more realistic.
Worker's have a vital role to play, realising and accepting that as painful as it is, the $$$ need to be honed in somewhat, that work rules need to be changed, all to ensure the continued survival of their employer, and their longevity of employment.
But it's all to no avail if the airline management have no trust or respect from the workforce. And when you have a shaky business plan, a lack of direction AND a total breakdown in relations between workforce and top management, you have a model that (excuse the pun) just won't fly. No matter how deep you slash and burn the contracts and pensions.
British Airway's has risen from it's quarter's of losses, and is now turning to the future with a robust business plan, cost's down, and real results already showing through. They've got a long way to go yet. But BA is a prime example of how an airline can still be succesful despite operating in a heavily unionised (and higher cost) environment than it's competitiors.
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Yet another analysis:
Sun, April 4, 2004
AirCan headwind 'unnerving'
Expert warns airline's uncertain financial footing could hurt business
By MICHELLE MARK, CALGARY SUN
Faith in the immediate future of Air Canada is plummeting fast as the beleaguered airline faces more turbulence. Barry Prentice, director of the University of Manitoba-based Transportation Institute, says consumers will be reluctant to fly Air Canada anytime soon for fear of being stranded if the airline goes belly up.
"This is unnerving for consumers," he said.
"It's certainly possible people will be worried about booking with Air Canada due to the possibility of being stranded someplace."
Trinity Time Investments, the airline's current proposed major investor, said Friday it will not extend an April 30 deadline for the airline to emerge from creditor protection and plans to walk away from its $650-million investment.
The company, headed by Hong Kong businessman Victor Li, said it was also releasing Air Canada from the exclusivity obligations of their investment deal -- a move that will allow the airline to seek out another investor willing to fill the void left by Trinity.
"It's hard to say at this point if this is just hard-nosed tactics in trying to get the best deal, but it could be a fundamental tipping point in the story," Prentice said, adding if Li pulls his support, it could mean the end of Air Canada.
"If Mr. Li walks away at this point, I can't see anybody else walking in and offering them more money," he said.
But Air Canada's woes could be good news for Canada's other growing airlines such as Jetsgo and WestJet.
"This couldn't be happening at a more opportune time for them," he said.
"They have airplanes that they have to fill and if people are more uncertain, they may start looking at these airlines as an alternative."
Meanwhile, the monitor overseeing Air Canada's restructuring says the bankruptcy court should extend the airline's creditor protection to give it more time to find a new investor.
Air Canada has said it has enough cash in its bank accounts and through its credit facilities to continue operating as usual while it seeks alternative partners. Air Canada has been under creditor protection since April 1 last year.
http://www.canoe.ca/NewsStand/Calgar...04/408089.html
Sun, April 4, 2004
AirCan headwind 'unnerving'
Expert warns airline's uncertain financial footing could hurt business
By MICHELLE MARK, CALGARY SUN
Faith in the immediate future of Air Canada is plummeting fast as the beleaguered airline faces more turbulence. Barry Prentice, director of the University of Manitoba-based Transportation Institute, says consumers will be reluctant to fly Air Canada anytime soon for fear of being stranded if the airline goes belly up.
"This is unnerving for consumers," he said.
"It's certainly possible people will be worried about booking with Air Canada due to the possibility of being stranded someplace."
Trinity Time Investments, the airline's current proposed major investor, said Friday it will not extend an April 30 deadline for the airline to emerge from creditor protection and plans to walk away from its $650-million investment.
The company, headed by Hong Kong businessman Victor Li, said it was also releasing Air Canada from the exclusivity obligations of their investment deal -- a move that will allow the airline to seek out another investor willing to fill the void left by Trinity.
"It's hard to say at this point if this is just hard-nosed tactics in trying to get the best deal, but it could be a fundamental tipping point in the story," Prentice said, adding if Li pulls his support, it could mean the end of Air Canada.
"If Mr. Li walks away at this point, I can't see anybody else walking in and offering them more money," he said.
But Air Canada's woes could be good news for Canada's other growing airlines such as Jetsgo and WestJet.
"This couldn't be happening at a more opportune time for them," he said.
"They have airplanes that they have to fill and if people are more uncertain, they may start looking at these airlines as an alternative."
Meanwhile, the monitor overseeing Air Canada's restructuring says the bankruptcy court should extend the airline's creditor protection to give it more time to find a new investor.
Air Canada has said it has enough cash in its bank accounts and through its credit facilities to continue operating as usual while it seeks alternative partners. Air Canada has been under creditor protection since April 1 last year.
http://www.canoe.ca/NewsStand/Calgar...04/408089.html
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YYC F/A
ok, YYC... look I'm involve in this probleme... I may lose my job the same as you... but You know regarding the pension ... Idon,t think you will lose a lot... what I have understood... nobody will lose ! but because the union have decided not to talk about it... they'd rather losing there job... then losing a little bit of money!!!! excuse me but I have seen that in France already... with Air Lib and AOM.... with Air littoral riviera... the union didn't beleive that the company will shut down.... and for just a little bit of sacrifices... they all lost their jobs.... that's clever!!!!! really clever!
sorry but I don,t trust the union anymore!!! they are fare away from the reality and they fighting ONLY for their own prospective!!!!... so beleive it ! I'm blaming the management too....bad decisions have been taken... and Robert Milton is definitelly a bad boss.... he doesn't have any guts! to stand in front of the pilots group and tell them to shut the F...ck up! and this is way we are here today!!!! I'm sad about it because I know that there is a lot of good guys working with us.... and we don't deserve that! but this is the life!
sorry but I don,t trust the union anymore!!! they are fare away from the reality and they fighting ONLY for their own prospective!!!!... so beleive it ! I'm blaming the management too....bad decisions have been taken... and Robert Milton is definitelly a bad boss.... he doesn't have any guts! to stand in front of the pilots group and tell them to shut the F...ck up! and this is way we are here today!!!! I'm sad about it because I know that there is a lot of good guys working with us.... and we don't deserve that! but this is the life!
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It isn't the recent union decisions that have created the problem - it was many years of greedy union actions that had baggage handlers making $70,000/year and thus slowly and eventually resulting in an airline with an uncompetitive cost structure that could not deal with the industry downturn.
Oh yeah, don't forget the management's aggressive purchase of debt-ridden Canadian Airlines.
The airline had already been fatally flawed, and these recent pension negotiations are akin to which bandaid to put on a ruptured aorta.
_____________________________________________________
Air Canada unions plot strategy after Trinity pulls out
Last Updated Sun, 04 Apr 2004 19:59:51
TORONTO - The leaders of Air Canada's main unions wrapped up a meeting Sunday refusing to grant more concessions to an airline they say is not on the brink of liquidation.
INDEPTH: Air Canada
"This is not an issue of concessions right now," said Pamela Sachs of the Canadian Union of Public Employees, which represents flight attendants.
"We want to see the new business plan. Then we will look at it really carefully and make some decisions. Then we will go forward," Sachs said. "Air Canada will survive. Air Canada will come out of this, and it will come out of it much stronger."
Workers have already given up more than a billion dollars in salaries and benefits, Sachs said, and it's time other options were explored – such as finding another investor willing to keep the money-losing airline aloft during restructuring.
On Friday, Hong Kong billionaire Victor Li's company, Trinity Time Investments, said it was walking away from a tentative agreement to pour $650-million into Air Canada. Trinity cited several problems, including rising fuel prices and high labour costs – especially the unions' refusal to water down their pension plans.
FROM APRIL 2, 2004: Trinity Time decision puts Air Canada future in doubt
On Sunday, union leaders once again ruled out bending on pension reform. Instead, they emphasized that Air Canada has plenty of cash on hand to keep operating while looking for another investor to replace Li's company.
"We want to make sure that that customers are not worried that the end of the world is coming," said Gary Fane of the Canadian Autoworkers Union, which represents thousands of Air Canada ticket agents.
"There's over $900 million in cash reserves sitting there, and the place is not going bankrupt."
The three-hour meeting was held behind closed doors in Toronto. Union leaders refused to divulge any of their strategy, including whether they've talked to other investors themselves.
'Pension from unemployment insurance?'
Although union leaders say they're united in their refusal to make any more concessions, cracks are appearing within the membership.
Some workers are afraid they will wind up with nothing if the airline goes bankrupt. In a few internet discussion forums, these employees are telling their unions to canvass membership on the latest offer.
"I'm angry about it," said an Ontario aircraft mechanic who wants union leaders to put Air Canada's latest pension plan proposals to a vote.
"What kind of pension can I expect from unemployment insurance? I think they're torpedoing our jobs, in essence, and I'd like to look into the possibility of legal action," he told CBC News.
Even if another investor is found to replace Trinity, industry analysts predict the unions will be asked to make additional concessions – perhaps even larger ones than Li's company demanded.
FROM APRIL 3, 2004: Give Air Canada more time, bankruptcy court told
Air Canada, meanwhile, is expected to ask a judge to extend its protection from creditors, which is set to expire April 15. On Saturday, court-appointed monitor Ernst and Young recommended the airline be given more time to restructure and find a new investor.
Written by CBC News Online staff
Oh yeah, don't forget the management's aggressive purchase of debt-ridden Canadian Airlines.
The airline had already been fatally flawed, and these recent pension negotiations are akin to which bandaid to put on a ruptured aorta.
_____________________________________________________
Air Canada unions plot strategy after Trinity pulls out
Last Updated Sun, 04 Apr 2004 19:59:51
TORONTO - The leaders of Air Canada's main unions wrapped up a meeting Sunday refusing to grant more concessions to an airline they say is not on the brink of liquidation.
INDEPTH: Air Canada
"This is not an issue of concessions right now," said Pamela Sachs of the Canadian Union of Public Employees, which represents flight attendants.
"We want to see the new business plan. Then we will look at it really carefully and make some decisions. Then we will go forward," Sachs said. "Air Canada will survive. Air Canada will come out of this, and it will come out of it much stronger."
Workers have already given up more than a billion dollars in salaries and benefits, Sachs said, and it's time other options were explored – such as finding another investor willing to keep the money-losing airline aloft during restructuring.
On Friday, Hong Kong billionaire Victor Li's company, Trinity Time Investments, said it was walking away from a tentative agreement to pour $650-million into Air Canada. Trinity cited several problems, including rising fuel prices and high labour costs – especially the unions' refusal to water down their pension plans.
FROM APRIL 2, 2004: Trinity Time decision puts Air Canada future in doubt
On Sunday, union leaders once again ruled out bending on pension reform. Instead, they emphasized that Air Canada has plenty of cash on hand to keep operating while looking for another investor to replace Li's company.
"We want to make sure that that customers are not worried that the end of the world is coming," said Gary Fane of the Canadian Autoworkers Union, which represents thousands of Air Canada ticket agents.
"There's over $900 million in cash reserves sitting there, and the place is not going bankrupt."
The three-hour meeting was held behind closed doors in Toronto. Union leaders refused to divulge any of their strategy, including whether they've talked to other investors themselves.
'Pension from unemployment insurance?'
Although union leaders say they're united in their refusal to make any more concessions, cracks are appearing within the membership.
Some workers are afraid they will wind up with nothing if the airline goes bankrupt. In a few internet discussion forums, these employees are telling their unions to canvass membership on the latest offer.
"I'm angry about it," said an Ontario aircraft mechanic who wants union leaders to put Air Canada's latest pension plan proposals to a vote.
"What kind of pension can I expect from unemployment insurance? I think they're torpedoing our jobs, in essence, and I'd like to look into the possibility of legal action," he told CBC News.
Even if another investor is found to replace Trinity, industry analysts predict the unions will be asked to make additional concessions – perhaps even larger ones than Li's company demanded.
FROM APRIL 3, 2004: Give Air Canada more time, bankruptcy court told
Air Canada, meanwhile, is expected to ask a judge to extend its protection from creditors, which is set to expire April 15. On Saturday, court-appointed monitor Ernst and Young recommended the airline be given more time to restructure and find a new investor.
Written by CBC News Online staff
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you are right...
yes I will agree with you to say that baggage handler making 70.000$ up to 90.000$ per year is absolutly a non sens!
but hey you know what they are all big kids beleiving that they have all the right! well.... I still don't think that the government will AC going bankrupt!!!... too much to lose for Martin!!! the election are coming soon....
lucky them!...... but we nerver know! I just hope I will be able to keep flying... for couple of weeks!!!
but hey you know what they are all big kids beleiving that they have all the right! well.... I still don't think that the government will AC going bankrupt!!!... too much to lose for Martin!!! the election are coming soon....
lucky them!...... but we nerver know! I just hope I will be able to keep flying... for couple of weeks!!!
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I hope that the government doesn't bail them out again. It would create a great chance for someone to come in, buy the name and take over the profitable routes, especially the international ones. Westjet, Jetsgo and the others can take over the bulk of the internal routes. I don't see how they can survive for long even with a bail out with the current management and union attitudes. Southwest is heavily unionized, but they don't have trouble making money.
Why Air Canada is Doomed and Westjet is Ready to Soar
goates
Why Air Canada is Doomed and Westjet is Ready to Soar
goates
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From the 'Why Air Canada is Doomed and Westjet is Ready to Soar' link above:
>>Michael Roach knows airlines. He was a top adviser to U.S. presidents Gerry Ford and Jimmy Carter on the Airline Deregulation Act...and was a founding member and president of America West Airlines, the only surviving U.S. airline of the immediate post-deregulation era.
As a consultant, he now advises airlines, airports and governments around the world.<<
I wouldn't call that exactly a scintillating track record if he advised on deregulation and the only "immediate post-deregulation era" survivor was America West <g>.
Still, he may be right. Air Canada employees expect the government to bail them out no matter what. After all, they are God's Gift to Aviation, just like United, Pan Am and a lot of other Once Great Airlines. A year ago I would say there is no way a socialist welfare state like Canada would let them go under. But, times are changing...
>>Michael Roach knows airlines. He was a top adviser to U.S. presidents Gerry Ford and Jimmy Carter on the Airline Deregulation Act...and was a founding member and president of America West Airlines, the only surviving U.S. airline of the immediate post-deregulation era.
As a consultant, he now advises airlines, airports and governments around the world.<<
I wouldn't call that exactly a scintillating track record if he advised on deregulation and the only "immediate post-deregulation era" survivor was America West <g>.
Still, he may be right. Air Canada employees expect the government to bail them out no matter what. After all, they are God's Gift to Aviation, just like United, Pan Am and a lot of other Once Great Airlines. A year ago I would say there is no way a socialist welfare state like Canada would let them go under. But, times are changing...
Last edited by Airbubba; 5th Apr 2004 at 07:03.
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I hope that the government doesn't bail them out again. It would create a great chance for someone to come in, buy the name and take over the profitable routes, especially the international ones. Westjet, Jetsgo and the others can take over the bulk of the internal routes
We're getting off topic somewhat, but the fact is that WestJet and Jetsgo have no interest in taking over many of the internal routes. They want to fly where there is the highest possible return on investment, and will quickly ditch even a profitable route if other 'grass is greener' opportunities exist elsewhere that offer a higher rate of return for the aircraft useage.
Canada is unique. We're the second largest country in the world geographically, so air service is vital. Yet turning a healthy profit on service to small isolated towns and communities can be challenging. It is vital that carriers such as Calm Air, Air Creebec, and of course AC's Jazz all have the ability to 'feed' into a unified central carrier.
There is no other carrier in Canada that is able to fill the void of AC. SkyService, HMY, Air Transat - they might pick up some slack. But the likelihood is that the bulk of the profitable routes referred to would be picked up by foreign carriers. Carriers who have no desire to become involved in marginal connecting service to regional destinations in Canada. Carriers who will be essentially taking what was once Canadian jobs, with the likelihood that the majority of those jobs will be gone forever.
In any event, WestJet follows the WN model closely. Like WN they fly one aircraft type, have no desire to invest in widebody aircraft, or fly intercontinental or longhaul international routes.
Quite aside from the fact that I find it sits somewhat queasily in my stomach that anyone could be 'hoping' that 30,000 people lose their jobs, I think that the ramifications for Canada would be far more profound than many might initially think.
Do I think that the goverment should 'bail' them out. Probably not. Although as already mentioned, Canada's reliance on air service could come into play, leaving the goverment forced to offer incentives and financial subsidy to other independant carriers to maintain service to many rural and isolated communities. It's a complex situation, there's no easy answers. What is clear is that AC is in a grave situation, and needs now more than ever strong leadership, a united and determined to succeed workforce, a strong and robust business plan, and not just another slash at the wage bill.
They seem to be pretty far off the mark on all counts right now. But it can be done. United ousted CEO Jim Goodwin who had become immensely unpopular with the workforce, and the trip into Chapter 11 finally got everyone to take a reality check and realise that this was not posturing - failure was real. But a strong leader in Glenn Tilton, a (so far) robust business plan, and a real step change in the workforce attitude mean that UA (while still a long way to go) is in a far better shape to emerge into profitability again.
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no one hopes AC fails but noway to the government bailing them out. 30000+ votes from AC employees is nothing compared to the millons of tax payers votes that would at risk. AC has had it good to long. Sorry, they have to do it on their own this time.
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I'm not hoping that 30000+ people lose their jobs. I also recognise that we do have a rather unique situation for air travel in this country. And I was definitely not trying to say that we let some foreign airline take over either. What I was trying to say was that the government should let the current Air Canada go. The company could kick out the current management and bring in new management and a new business plan that will work.
Right now they are trying to be everything to everyone, and end up doing it all poorly. They are also trying to beat everyone else at their game, instead of focusing on where they have the advantage. No one else in this country have any international routes, except for the tourist operators and no one else has a full service business class either. If they stuck to those areas, they could do pretty well. Jazz and the other regional airlines could take over the smaller routes and still feed into the larger cities.
True, Westjet and the others will drop a route if it isn't profitable, but they wouldn't be in business for long if they didn't. If there is a demand, someone will pick up the route. Probably with better sized aircraft to do the job. Why should someone fly half empty 737s if a 70 seat regional jet or a smaller turbo prop fits better? Maybe that's why Westjet has said that they are taking an initial look at regional jets.
I do hope Air Canada survives, just not in the current form. It's always nice to see the maple leaf amongst the tails at LAX and elsewhere.
goates
Right now they are trying to be everything to everyone, and end up doing it all poorly. They are also trying to beat everyone else at their game, instead of focusing on where they have the advantage. No one else in this country have any international routes, except for the tourist operators and no one else has a full service business class either. If they stuck to those areas, they could do pretty well. Jazz and the other regional airlines could take over the smaller routes and still feed into the larger cities.
True, Westjet and the others will drop a route if it isn't profitable, but they wouldn't be in business for long if they didn't. If there is a demand, someone will pick up the route. Probably with better sized aircraft to do the job. Why should someone fly half empty 737s if a 70 seat regional jet or a smaller turbo prop fits better? Maybe that's why Westjet has said that they are taking an initial look at regional jets.
I do hope Air Canada survives, just not in the current form. It's always nice to see the maple leaf amongst the tails at LAX and elsewhere.
goates