Air Canada at impasse
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Air Canada at impasse
Air Canada halts talks with CAW, declares impasse after days of negotiations
at 14:33 on May 19, 2004, EST.
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TORONTO (CP) - Air Canada's 13-month-long restructuring was thrown into turmoil Wednesday after the company said it had pulled out of talks with the Canadian Auto Workers union on a cost-cutting deal intended to ensure a German bank's investment in the insolvent airline.
The airline said wage concession talks reached an "impasse" because the union has not moved far enough in a counter-proposal presented a day earlier.
"There was insufficient movement in the union's response to the company's offer of May 17 to warrant a continuation of discussions," Paul Brotto, Air Canada's executive vice-president, cost control and planning, said in a release.
In key talks needed to secure its restructuring, Air Canada had reached concession agreements with all of its labour groups except the CAW, Canada's largest industrial union and one of its most militant.
Germany's Deutsche Bank had demanded significant concessions from Air Canada's workers as part of a proposed bailout plan to guarantee an $850-million investment in the insolvent airline. Also thrown into doubt is Air Canada's $1.5-billion-US financing agreement on airplane leases with GE Capital Aviation Services. The GE unit has said it could drop its funding if Deutsche Bank withdraws.
"We are too close to our goal to turn back. And so we will immediately commence discussions with Deutsche Bank and GECAS to determine next steps," Brotto said.
GECAS spokesman Eric Jones said his company was "very disappointed and we're evaluating our options."
It's uncertain how the labour impasse will impact the airline's operations and restructuring hopes, but the dispute is not expected to affect Air Canada flights in the short term.
The CAW has said it agreed to new concessions to make up for an $18.3-million shortfall in the $165 million in labour cost cuts it agreed to in April 2003. But the CAW said it was unwilling to accept a company request to cover a higher $45-million shortfall apparently sought after Deutsche Bank accountants reviewed last year's cost-cutting deal with the union.
The CAW said it won't be pressured into the steeper cuts and suggested other investors are waiting in the wings to replace at least part of the German bank's commitment.
"They agree on our $18.3 million," union president Buzz Hargrove said. "They can't find one more penny we owe, but they're saying we're going to pay it anyway.
"We ain't (expletive) doing it."
Hargrove appeared to be caught off-guard by Air Canada's declaration of an impasse, saying he learned of it while speaking on a talk show. He said he would assemble his negotiating team and hold a news conference later Wednesday afternoon.
He said Air Canada's declaration of an impasse won't prevent the CAW and other unions from reaching a deal with an investor other than Deutsche Bank.
"They've said they're not going to be meeting, so I'm going to accept that we probably won't be meeting with them," Hargrove said. "Eventually, somebody will want to meet with us."
Speculation generated by the union suggested that Gerald Greenwald, a former United Airlines chief executive, was interested in discussing a potential investment in the company.
Another rumour had airline industry veteran Donald Carty taking a run at Air Canada, supported by several institutional investors. But the Ontario Teachers' Pension Plan Board flatly denied reports Wednesday they've been planning making any investment, with or without Carty, in Air Canada.
Hargrove has repeatedly said the airline is asking for about 5,000 members at the main airline to each take an average $10,000 pay cut. They earn between $35,000 and $49,000 a year.
Air Canada sources say that's inaccurate, and that the cost savings it's seeking shouldn't be represented as an across-the-board wage slash, but rather through changes in pay scales, overtime rates and by replacing retiring workers with new employees paid at a much lower rate.
Hargrove said that no matter how the company chooses to calculate its proposed savings, its demands still work out to $10,000 per employee. "No matter how you add it up, it comes to $10,000 per head."
The current CAW agreement with Air Canada includes a six-year wage freeze, with raises only able to be negotiated through a third-party arbitrator. Hargrove said the union had agreed to maintain that wage freeze in a new contract, but CAW negotiators adamantly refused "huge cuts on top of the six-year wage freeze that's already agreed to."
It's believed the company wanted concessions from CAW similar to what was achieved Tuesday with the Canadian Union of Public Employees, or CUPE, which represents Air Canada flight attendants.
Pamela Sachs, president of CUPE's Air Canada component, said her union met a $65-million shortfall from what it had negotiated with Air Canada last year. That works out to about $10,000 apiece for her 6,500 members, but that doesn't translate into a $10,000 pay cut for each worker.
"It wasn't strictly salary," Sachs said Wednesday.
She wouldn't elaborate on details of the deal ahead of a ratification vote next month - which may not be held, now that the CAW talks have ended.
But she added: "What it really does boil down to is that fewer people will be working more hours for less money. That's what it comes down to in the end."
Asked before news of the Air Canada-CAW impasse about her hopes for the restructuring process ending soon, she said: "It would just be nice to know for everyone that it's over. But we'll just have to wait and see."
STEVE ERWIN
© The Canadian Press, 2003
at 14:33 on May 19, 2004, EST.
Printable version Send to a friend
TORONTO (CP) - Air Canada's 13-month-long restructuring was thrown into turmoil Wednesday after the company said it had pulled out of talks with the Canadian Auto Workers union on a cost-cutting deal intended to ensure a German bank's investment in the insolvent airline.
The airline said wage concession talks reached an "impasse" because the union has not moved far enough in a counter-proposal presented a day earlier.
"There was insufficient movement in the union's response to the company's offer of May 17 to warrant a continuation of discussions," Paul Brotto, Air Canada's executive vice-president, cost control and planning, said in a release.
In key talks needed to secure its restructuring, Air Canada had reached concession agreements with all of its labour groups except the CAW, Canada's largest industrial union and one of its most militant.
Germany's Deutsche Bank had demanded significant concessions from Air Canada's workers as part of a proposed bailout plan to guarantee an $850-million investment in the insolvent airline. Also thrown into doubt is Air Canada's $1.5-billion-US financing agreement on airplane leases with GE Capital Aviation Services. The GE unit has said it could drop its funding if Deutsche Bank withdraws.
"We are too close to our goal to turn back. And so we will immediately commence discussions with Deutsche Bank and GECAS to determine next steps," Brotto said.
GECAS spokesman Eric Jones said his company was "very disappointed and we're evaluating our options."
It's uncertain how the labour impasse will impact the airline's operations and restructuring hopes, but the dispute is not expected to affect Air Canada flights in the short term.
The CAW has said it agreed to new concessions to make up for an $18.3-million shortfall in the $165 million in labour cost cuts it agreed to in April 2003. But the CAW said it was unwilling to accept a company request to cover a higher $45-million shortfall apparently sought after Deutsche Bank accountants reviewed last year's cost-cutting deal with the union.
The CAW said it won't be pressured into the steeper cuts and suggested other investors are waiting in the wings to replace at least part of the German bank's commitment.
"They agree on our $18.3 million," union president Buzz Hargrove said. "They can't find one more penny we owe, but they're saying we're going to pay it anyway.
"We ain't (expletive) doing it."
Hargrove appeared to be caught off-guard by Air Canada's declaration of an impasse, saying he learned of it while speaking on a talk show. He said he would assemble his negotiating team and hold a news conference later Wednesday afternoon.
He said Air Canada's declaration of an impasse won't prevent the CAW and other unions from reaching a deal with an investor other than Deutsche Bank.
"They've said they're not going to be meeting, so I'm going to accept that we probably won't be meeting with them," Hargrove said. "Eventually, somebody will want to meet with us."
Speculation generated by the union suggested that Gerald Greenwald, a former United Airlines chief executive, was interested in discussing a potential investment in the company.
Another rumour had airline industry veteran Donald Carty taking a run at Air Canada, supported by several institutional investors. But the Ontario Teachers' Pension Plan Board flatly denied reports Wednesday they've been planning making any investment, with or without Carty, in Air Canada.
Hargrove has repeatedly said the airline is asking for about 5,000 members at the main airline to each take an average $10,000 pay cut. They earn between $35,000 and $49,000 a year.
Air Canada sources say that's inaccurate, and that the cost savings it's seeking shouldn't be represented as an across-the-board wage slash, but rather through changes in pay scales, overtime rates and by replacing retiring workers with new employees paid at a much lower rate.
Hargrove said that no matter how the company chooses to calculate its proposed savings, its demands still work out to $10,000 per employee. "No matter how you add it up, it comes to $10,000 per head."
The current CAW agreement with Air Canada includes a six-year wage freeze, with raises only able to be negotiated through a third-party arbitrator. Hargrove said the union had agreed to maintain that wage freeze in a new contract, but CAW negotiators adamantly refused "huge cuts on top of the six-year wage freeze that's already agreed to."
It's believed the company wanted concessions from CAW similar to what was achieved Tuesday with the Canadian Union of Public Employees, or CUPE, which represents Air Canada flight attendants.
Pamela Sachs, president of CUPE's Air Canada component, said her union met a $65-million shortfall from what it had negotiated with Air Canada last year. That works out to about $10,000 apiece for her 6,500 members, but that doesn't translate into a $10,000 pay cut for each worker.
"It wasn't strictly salary," Sachs said Wednesday.
She wouldn't elaborate on details of the deal ahead of a ratification vote next month - which may not be held, now that the CAW talks have ended.
But she added: "What it really does boil down to is that fewer people will be working more hours for less money. That's what it comes down to in the end."
Asked before news of the Air Canada-CAW impasse about her hopes for the restructuring process ending soon, she said: "It would just be nice to know for everyone that it's over. But we'll just have to wait and see."
STEVE ERWIN
© The Canadian Press, 2003
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http://www.cbc.ca/stories/2004/05/19...impasse_040519
Summary:
CBC reported that the federal government will not bail out Air Canada should DB pull out of the deal.
I guess tax payers are tired of throwing their money at a poorly run airline. With a federal election coming up soon I don't think any parties would even want to do such a thing. But who knows, DB would agree to a lower cut back and bail Air Canada out.
Summary:
CBC reported that the federal government will not bail out Air Canada should DB pull out of the deal.
I guess tax payers are tired of throwing their money at a poorly run airline. With a federal election coming up soon I don't think any parties would even want to do such a thing. But who knows, DB would agree to a lower cut back and bail Air Canada out.
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By FRED LAZAR
Friday, May 21, 2004 - Page A19
Does Canada need Air Canada? Across the world, governments have stepped in to prop up failing national airlines, or to create new national carriers. They've done so to ensure air-travel connectivity and avoid job losses (the death of a national carrier causes job losses well beyond the airline itself).
Caving into the unions, the Italian government is currently keeping Alitalia on life support. In Belgium, the government brought together a mix of private companies and regional governments to create SN Brussels from the ashes of Sabena, in order to keep Brussels connected to the rest of the EU. After Swissair collapsed, the Swiss converted Crossair (Swissair's former regional airline subsidiary) into Swiss Airlines to save jobs and maintain Switzerland's international connections. The New Zealand government got back into the airline business in 2001 when it recapitalized Air New Zealand to keep the country connected internally and with international markets.
And the Canadian government bailed out Canadian Airlines on three occasions in the 1990s, primarily to save jobs and placate Western Canadian voters.
Now, as unions negotiate with Air Canada for our national carrier's future, the question arises: If Canada needs Air Canada, what should Ottawa do?
I'd argue that Air Canada plays an important economic role: Many airports depend on the company for their survival. A domestic presence in the air transport industry is much more important to Canadians and the economy than in other industries (e.g. steel, auto) to which Ottawa will provide financial assistance.
Like the finance, telecommunications, and energy sectors, an efficient transportation sector is essential to economic progress. It does matter how we can get from one location to another via air. Air transport is essential to economic progress. Mobility of people and goods is critical for economic growth and development at the national and regional levels.
Consider that Air Canada and Jazz serve more than 50 U.S. cities directly from Toronto. All other carriers (US and Jetsgo) serve less than 15 collectively. Without Air Canada, we will still be able to get to any destination we want -- but we may have to make an extra stop, and possibly an extra change of planes to get there. This will impose costs on all Canadian travellers and shippers, and make the country less competitive.
Still, Ottawa should not consider a bailout for Air Canada. All Air Canada needs is a level playing field; for that matter, so does the entire domestic airline industry.Yet federal policy has turned the air transport industry into a cash cow.
Consider the combined effects of the security tax (approximately $200-million), government ground-lease payments (the approximately $250-million airport authorities must pay each year to Ottawa, which retains ownership of airports and their lands) and surpluses of the non-profit airports (approximately $100-million).
Add in Nav Canada's annual interest and principal payments on the $1.5-billion debt it incurred in buying out the air navigation assets from Ottawa, and of the Greater Toronto Airports Authority on the $800-million debt it incurred for bailing out Jean Chrétien when he terminated a contract with the private developers of Terminal 3 at Toronto's Pearson International Airport ($180-$220 million). As well, add in the excise tax on jet fuel ($50-million).
These foolish government policies put additional costs of almost $800-million per year on the airlines and their customers. At least $350-million falls on Air Canada -- an amount exceeding the $200-million shortfall Air Canada is currently discussion with its unions.
Canada is big and sparsely populated, so federal air policy should focus on reducing the costs and barriers to travel rather than serving as one of the primary disincentives in the system.
Ottawa should immediately rescind the Air Canada Participation Act which forces Air Canada to maintain three maintenance facilities and subjects it to stringent official-language requirements. Ottawa should declare the airlines, the airports and Nav Canada as essential services, revoking the right to strike, and subjecting employer-employee negotiations to final-offer arbitration (with consumers' ability to pay as the key factor in arbitration decisions).
Ottawa should also change the Companies Creditors' Arrangements Act to allow presiding judges to abrogate existing labour contracts. If that had been done when Paul Martin became Prime Minister, Air Canada and its employees would not have had to endure the current labour turmoil.
As well, Ottawa should: increase the foreign ownership limits to 49 per cent; start negotiations with the Americans to create a North American Common Aviation Area; stop collecting the $250-million annually in ground rents from the country's largest airports; and subject the largest airport authorities to U.K.-style price regulation. If Canada's eight largest airport authorities had broken even last year and paid no ground rents to Ottawa, aeronautical fees for all airlines could have been reduced by at least 60 per cent.
The government also should subject Nav Canada to economic regulation and impose some discipline on the company to more effectively cut its costs. Nav Canada has just proposed its fourth price increase since January, 2002.
Air Canada doesn't need a bailout. It needs measures that create the framework for all our carriers to thrive globally and ensure that Canadians are connected directly, conveniently and efficiently to the world
__________________
Friday, May 21, 2004 - Page A19
Does Canada need Air Canada? Across the world, governments have stepped in to prop up failing national airlines, or to create new national carriers. They've done so to ensure air-travel connectivity and avoid job losses (the death of a national carrier causes job losses well beyond the airline itself).
Caving into the unions, the Italian government is currently keeping Alitalia on life support. In Belgium, the government brought together a mix of private companies and regional governments to create SN Brussels from the ashes of Sabena, in order to keep Brussels connected to the rest of the EU. After Swissair collapsed, the Swiss converted Crossair (Swissair's former regional airline subsidiary) into Swiss Airlines to save jobs and maintain Switzerland's international connections. The New Zealand government got back into the airline business in 2001 when it recapitalized Air New Zealand to keep the country connected internally and with international markets.
And the Canadian government bailed out Canadian Airlines on three occasions in the 1990s, primarily to save jobs and placate Western Canadian voters.
Now, as unions negotiate with Air Canada for our national carrier's future, the question arises: If Canada needs Air Canada, what should Ottawa do?
I'd argue that Air Canada plays an important economic role: Many airports depend on the company for their survival. A domestic presence in the air transport industry is much more important to Canadians and the economy than in other industries (e.g. steel, auto) to which Ottawa will provide financial assistance.
Like the finance, telecommunications, and energy sectors, an efficient transportation sector is essential to economic progress. It does matter how we can get from one location to another via air. Air transport is essential to economic progress. Mobility of people and goods is critical for economic growth and development at the national and regional levels.
Consider that Air Canada and Jazz serve more than 50 U.S. cities directly from Toronto. All other carriers (US and Jetsgo) serve less than 15 collectively. Without Air Canada, we will still be able to get to any destination we want -- but we may have to make an extra stop, and possibly an extra change of planes to get there. This will impose costs on all Canadian travellers and shippers, and make the country less competitive.
Still, Ottawa should not consider a bailout for Air Canada. All Air Canada needs is a level playing field; for that matter, so does the entire domestic airline industry.Yet federal policy has turned the air transport industry into a cash cow.
Consider the combined effects of the security tax (approximately $200-million), government ground-lease payments (the approximately $250-million airport authorities must pay each year to Ottawa, which retains ownership of airports and their lands) and surpluses of the non-profit airports (approximately $100-million).
Add in Nav Canada's annual interest and principal payments on the $1.5-billion debt it incurred in buying out the air navigation assets from Ottawa, and of the Greater Toronto Airports Authority on the $800-million debt it incurred for bailing out Jean Chrétien when he terminated a contract with the private developers of Terminal 3 at Toronto's Pearson International Airport ($180-$220 million). As well, add in the excise tax on jet fuel ($50-million).
These foolish government policies put additional costs of almost $800-million per year on the airlines and their customers. At least $350-million falls on Air Canada -- an amount exceeding the $200-million shortfall Air Canada is currently discussion with its unions.
Canada is big and sparsely populated, so federal air policy should focus on reducing the costs and barriers to travel rather than serving as one of the primary disincentives in the system.
Ottawa should immediately rescind the Air Canada Participation Act which forces Air Canada to maintain three maintenance facilities and subjects it to stringent official-language requirements. Ottawa should declare the airlines, the airports and Nav Canada as essential services, revoking the right to strike, and subjecting employer-employee negotiations to final-offer arbitration (with consumers' ability to pay as the key factor in arbitration decisions).
Ottawa should also change the Companies Creditors' Arrangements Act to allow presiding judges to abrogate existing labour contracts. If that had been done when Paul Martin became Prime Minister, Air Canada and its employees would not have had to endure the current labour turmoil.
As well, Ottawa should: increase the foreign ownership limits to 49 per cent; start negotiations with the Americans to create a North American Common Aviation Area; stop collecting the $250-million annually in ground rents from the country's largest airports; and subject the largest airport authorities to U.K.-style price regulation. If Canada's eight largest airport authorities had broken even last year and paid no ground rents to Ottawa, aeronautical fees for all airlines could have been reduced by at least 60 per cent.
The government also should subject Nav Canada to economic regulation and impose some discipline on the company to more effectively cut its costs. Nav Canada has just proposed its fourth price increase since January, 2002.
Air Canada doesn't need a bailout. It needs measures that create the framework for all our carriers to thrive globally and ensure that Canadians are connected directly, conveniently and efficiently to the world
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I agree whole heartedly with the Lazar article. Federal Government policy makes the airline industry survive with far too many obstacles. Then, how many times have they had to throw money at Canadian Ailines or Air Canada in the past.
Air Transport is essential in Canada. Removing barriers to doing business would be good for the economy in general, not just the aviation industry.
Air Transport is essential in Canada. Removing barriers to doing business would be good for the economy in general, not just the aviation industry.
Drain Bamaged
I care ! 
http://www.cbc.ca/stories/2004/05/21.../aircan_040521
TORONTO - Air Canada on Friday won a four-month extension of its court-ordered creditor protection, a day after the airline reached a tentative cost-cutting deal with the Canadian Auto Workers.
Justice John Farley issued the extension in a Toronto court room. His previous extension of the company's bankruptcy protection was due to expire today.
Now, who knows if one "busy" summer will be enough to get back on track.
http://www.cbc.ca/stories/2004/05/21.../aircan_040521
TORONTO - Air Canada on Friday won a four-month extension of its court-ordered creditor protection, a day after the airline reached a tentative cost-cutting deal with the Canadian Auto Workers.
Justice John Farley issued the extension in a Toronto court room. His previous extension of the company's bankruptcy protection was due to expire today.
Now, who knows if one "busy" summer will be enough to get back on track.
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Well the union members themselves still need to vote on the deal. Plus a lot of people are still thinking about Air Canada in the long term and some of them don't have a really good out look. If Air Canada don't get their acts together, some predict they will file bankrupty again in about a year or two. While I personally don't like flying with Air Canada, I do hope they get their act together because a lot of jobs are on the line here.
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I have travelled on AC as ID passenger. The crew on board were friendly. The ground staff at the check-in counter were terrible. They have attitude problem. They were not friendly and they acted like I was bothering them when I checked in. I do not wish anyone to lose their jobs but with that type of attitude, they are driving passengers away and shut the company.
