Air Canada: final bankrupcy timer set

The bankrupcy judged extended AC's bankrupcy protection to only April 15th
instead of the 30th as AC had requested.

The federal government has leaked the fact that it had been in talks with
Westjet and others to find out, shoudl Ac be liquidated, how much of AC's
loads they could handle, going as far as allowing Westjet to wet lease
aircraft and crews from US carriers to fill the void.

The problem is that Unions had negotiated wage concessions with the condition
that their pension plan be preserved. That pension plan has a 1.3 billion deficit.

The potential saviour, Victor Li, wants the unions to accept a defined
contribution plan, instead of defined benefit which they have now. The unions
are refusing. The whole restructuring, investment by Li and emergence from
bankrupcy depends on unions agreeing.

Also, AC is about to announce that the wage concessions and restructuring done
so far had not done much to improve its financial situation due to increase in
fuel prices and increased competition from Westjet and Jetsgo.

The bluff has been called. Lets see how the unions deal with it.

This time around, there is no Onex to make tons of promises to unions, knowing
full well that the courts would throw the deal out. The Unions may be
expecting some magic rich uncle to materialise in the last minute and make
promises to save their pension plan. But even the consortium in which Brian
Mulroney is involved is conspicusouly silent on this one. (their offer to save
AC from bankrupcy had been dropped in favour of V. Li's offer).

If Victor Lee were smart, he'd offer an olive branch by offering to not only
kill the $20 million gift to Milton, but also fire Milton, something which the
unions have wanted to happen. After all, it is Milton and all his friends in
the past who drove AC into the ground.

What is interesting is that Li intends to buy 31% of Air Canada wioth his
investment. This is way over the limits imposed by law when AC was privatised,
the very limited which had been used to declare Onex's offer to buy both AC
and CP illegal.



I suspect this will be resolved on the 14th at 23:58 EDT.

The two 340-500s are painted and have their tail numbers. But not yet
registered in Canada.

Rob Sawatsky wrote:
plan. (2) does not affect (1) although it could have implications for
pension plan deficits in the future, which is why Li wants to go to a
DC plan to eliminate a good portion of the future risk to the
employer.

Thank for clarification. I thought that the DC was not only to prevent
deficits in future, but also help pay off the accumulated deficit. (is this
deficit the result of AC "stealing" money to pay for other expenses ?)

No other potential primary investment party can interfere in the
re-org process now. If Cerberus (Mulroney's connection) were to say
anything now they would be in extreme hot water and probably face
contempt of court charges and be liable for massive civil damages.

Why ? If Li threathens to pull out of the deal, isn't it fair to allow other
potential investors who were shunted to the side line to speak out ?

If I could get Uncle Bill Gates to lend me $1 billion from his pocket change
this week, wouldn't I have the right to make some offer on Air Canada ?

The unions and many others may be happy - but the major creditors
haven't made such a call and would likely see such a move as further
destabilizing the company

Well, does anyone really consider that the current management at Air Canada is
worthy of being kept ? After all, it is their actions, policies and
administration which brought AC into self inflicted bankrupcy.

From Victor Li's point of view, he has no choice but to lure Milton with some
$20 million carrot stick since he needs AC management's support for his deal
to go though. If he had openly stated that he'd fire Milton and company right
away, AC may not have chosen his offer.

But if the process is now to the point of no return, perhaps Li could tell
Milton to get lost since AC management's support is no longer necessary.

The applicable section of the Air Canada Public Participation Act was
repealed in 2001.

Thanks I hadn't heard of that. INteresting that the very thing that protected
AC from Onex was removed. But it is also the very thing that allows AC to find
a rich uncle to help ot out of self-inflicted wounds.

See some clarifying and correcting comments below:

nobody wrote in message ...
The bankrupcy judged extended AC's bankrupcy protection to only April 15th
instead of the 30th as AC had requested.

True

The federal government has leaked the fact that it had been in talks with
Westjet and others to find out, shoudl Ac be liquidated, how much of AC's
loads they could handle, going as far as allowing Westjet to wet lease
aircraft and crews from US carriers to fill the void.


True

The problem is that Unions had negotiated wage concessions with the condition
that their pension plan be preserved. That pension plan has a 1.3 billion deficit.


Just to clarify. There are two pension issues: (1). The deficit,
where AC and the unions have agreed to a repayment schedule of 10
years. The government regulator has not yet agreed to this. (2) The
demand by Victor Li that at least some of the pension scheme by
altered from a Defined Benefit (DB) to a Defined Contribution (DC)
plan. (2) does not affect (1) although it could have implications for
pension plan deficits in the future, which is why Li wants to go to a
DC plan to eliminate a good portion of the future risk to the
employer.

The potential saviour, Victor Li, wants the unions to accept a defined
contribution plan, instead of defined benefit which they have now. The unions
are refusing. The whole restructuring, investment by Li and emergence from
bankrupcy depends on unions agreeing.


Maybe. Li is free to adjust his conditional terms. Seeing as 1 union
has now agreed to cooperate to some degree with altering from a DB to
a DC plan, and if more unions follow. The judge could impose the same
terms on any holdout unions that represent a minority of employees,
though I'm sure he'd rather not.

Also, AC is about to announce that the wage concessions and restructuring done
so far had not done much to improve its financial situation due to increase in
fuel prices and increased competition from Westjet and Jetsgo.


Actually they have already stated that the labour concessions in
themselves have no yielded the expected savings to date, never mind
other costs.

The bluff has been called. Lets see how the unions deal with it.

This time around, there is no Onex to make tons of promises to unions, knowing
full well that the courts would throw the deal out. The Unions may be
expecting some magic rich uncle to materialise in the last minute and make
promises to save their pension plan. But even the consortium in which Brian
Mulroney is involved is conspicusouly silent on this one. (their offer to save
AC from bankrupcy had been dropped in favour of V. Li's offer).


No other potential primary investment party can interfere in the
re-org process now. If Cerberus (Mulroney's connection) were to say
anything now they would be in extreme hot water and probably face
contempt of court charges and be liable for massive civil damages.

If Victor Lee were smart, he'd offer an olive branch by offering to not only
kill the $20 million gift to Milton, but also fire Milton, something which the
unions have wanted to happen. After all, it is Milton and all his friends in
the past who drove AC into the ground.


The unions and many others may be happy - but the major creditors
haven't made such a call and would likely see such a move as further
destabilizing the company and threatening its exit for bankruptcy
protection.

What is interesting is that Li intends to buy 31% of Air Canada wioth his
investment. This is way over the limits imposed by law when AC was privatised,
the very limited which had been used to declare Onex's offer to buy both AC
and CP illegal.



The applicable section of the Air Canada Public Participation Act was
repealed in 2001.


I suspect this will be resolved on the 14th at 23:58 EDT.

The two 340-500s are painted and have their tail numbers. But not yet
registered in Canada.

nobody wrote in message ...
Rob Sawatsky wrote:
plan. (2) does not affect (1) although it could have implications for
pension plan deficits in the future, which is why Li wants to go to a
DC plan to eliminate a good portion of the future risk to the
employer.

Thank for clarification. I thought that the DC was not only to prevent
deficits in future, but also help pay off the accumulated deficit. (is this
deficit the result of AC "stealing" money to pay for other expenses ?)


Sort-of, it is a problem many companies with defined benefit plans
have because the value of the investments made by the pension plan
fell with the losses in the stock market going back a couple of years.
The deficit exists because the company has to now make up the
difference between the current asset value of the pension investments
and the required assets to fund the expected current and future
pension liabilities. The deficit also increased due to suspension of
contributions once AC filed for CCAA protection.

No other potential primary investment party can interfere in the
re-org process now. If Cerberus (Mulroney's connection) were to say
anything now they would be in extreme hot water and probably face
contempt of court charges and be liable for massive civil damages.

Why ? If Li threathens to pull out of the deal, isn't it fair to allow other
potential investors who were shunted to the side line to speak out ?

If I could get Uncle Bill Gates to lend me $1 billion from his pocket change
this week, wouldn't I have the right to make some offer on Air Canada ?


Because the whole thing is a court supervised and very complex
process. You can't have players jumping in left and right with new
proposals unless they have been solicited with the court's approval.
There was a process that chose Victor Li as the primary investor as
his offer was deemed to be the best chance for recovery. Now, if he
backs out, the whole process will start over, which will add huge
delays to the restructuring plan and also places a big chunk of new
money from GE in doubt possibly leading to AC's liquidation. If Li
pulls out, it is highly likely the creditors will get even less
because the losses and pressures on AC have increased in the interim
and there is less competition amongst potential investors with Li out
of the picture.

I'm not familiar with Canadian bakruptcy law or practice but I am
booked on Air Canada to London in July. What's likely to happen?

Thanks

On Wed, 31 Mar 2004 04:23:15 -0400, nobody wrote:

The bankrupcy judged extended AC's bankrupcy protection to only April 15th
instead of the 30th as AC had requested.

The federal government has leaked the fact that it had been in talks with
Westjet and others to find out, shoudl Ac be liquidated, how much of AC's
loads they could handle, going as far as allowing Westjet to wet lease
aircraft and crews from US carriers to fill the void.

The problem is that Unions had negotiated wage concessions with the condition
that their pension plan be preserved. That pension plan has a 1.3 billion deficit.

The potential saviour, Victor Li, wants the unions to accept a defined
contribution plan, instead of defined benefit which they have now. The unions
are refusing. The whole restructuring, investment by Li and emergence from
bankrupcy depends on unions agreeing.

Also, AC is about to announce that the wage concessions and restructuring done
so far had not done much to improve its financial situation due to increase in
fuel prices and increased competition from Westjet and Jetsgo.

The bluff has been called. Lets see how the unions deal with it.

This time around, there is no Onex to make tons of promises to unions, knowing
full well that the courts would throw the deal out. The Unions may be
expecting some magic rich uncle to materialise in the last minute and make
promises to save their pension plan. But even the consortium in which Brian
Mulroney is involved is conspicusouly silent on this one. (their offer to save
AC from bankrupcy had been dropped in favour of V. Li's offer).

If Victor Lee were smart, he'd offer an olive branch by offering to not only
kill the $20 million gift to Milton, but also fire Milton, something which the
unions have wanted to happen. After all, it is Milton and all his friends in
the past who drove AC into the ground.

What is interesting is that Li intends to buy 31% of Air Canada wioth his
investment. This is way over the limits imposed by law when AC was privatised,
the very limited which had been used to declare Onex's offer to buy both AC
and CP illegal.



I suspect this will be resolved on the 14th at 23:58 EDT.

The two 340-500s are painted and have their tail numbers. But not yet
registered in Canada.

Michael wrote:
I'm not familiar with Canadian bakruptcy law or practice but I am
booked on Air Canada to London in July. What's likely to happen?

Either way, you'll know in 2 weeks.

If unions reject the deal, they not only lose their jobs, but also their pension.
If unions accept the deal, they get less in their pension, but get a pension
and get to keep their jobs.

And if the deal is accepted, Air Canada will magically become very well (at
least for a while), get 2 new Airbus 340-500s, confirm a big order of flying
skidoos and jungle jets, and the president who caused this bankrupcy will get
a big fat $20 bonus.

Not the Karl Orff wrote:
there's a chance that the bunkruptcy court could order AC liquidated.

I think that liquidation is being used as a threath/bluff to get unions to
fall in line and agree to changes in pension plan.

Does the bankrupcy judge have the power to impose new pension programme on the
employees ?

Perhaps the union leaders would much prefer that the judge impose those
changed pension structures, which would let them off the hook since they would
be seen as fighting for maintained pension benefits to the end and never buckling.

If Union leaders were to agree to those changes today, they would be seen as
weak and not fighting for union members (their customers).

If the judge does not have the right to impose changed pension structure, then
one wonders where this bluff will go. The sooner the better.

IF AC were to be liquidated (small chance in my opinion), would they do as
with Swissair: Get Jazz to buy some of AC mainline assets and recreate Air
Canada from scratch with only minor inconveniences to passengers, but all
employees would be re-hired from scratch with totally different job offers,
pay/benefit scales ?

Or would AC truly disapear, with Westjet/Jetsgo/Transat/Canjet/Skyservice
filling the gap ?

In article ,
Michael wrote:

I'm not familiar with Canadian bakruptcy law or practice but I am
booked on Air Canada to London in July. What's likely to happen?

there's a chance that the bunkruptcy court could order AC liquidated.

On Thu, 01 Apr 2004 16:04:27 -0400, nobody wrote:

and the president who caused this bankrupcy will get
a big fat $20 bonus.

That would be $20 MILLION bonus. Also the #2 at AC gets $20 million.


andrew ]
--
for PGP public key, send email with "send public key" as subject

nobody muttered....



IF AC were to be liquidated (small chance in my opinion),

Unfamiliar with Canadian corporate bankruptcy statutes, I can only suggest
that the judge after representations by the trustee(s) (or equivalent) in
bankruptcy, could determine that continuing in business under current or
adjusted conditions would be fruitless and leave nothing for creditors, and
that no sale of assets allowing continuing operations with staff, name,
etc. was feasible, (s)he could order liquidation.

would they
do as with Swissair: Get Jazz to buy some of AC mainline assets and
recreate Air Canada from scratch with only minor inconveniences to
passengers, but all employees would be re-hired from scratch with
totally different job offers, pay/benefit scales ?

Or would AC truly disapear, with
Westjet/Jetsgo/Transat/Canjet/Skyservice filling the gap ?

The question to be answered is whether AC is a viable entity for which
accountants and analysts can generate a credible pro forma financial
statement showing potential profits (and as a result of which investors can
be convinced to make a necessary infusion of capital).

One of AC's problems has been the corporate image commitment to subsidize
the operations of all sorts of "flag"/prestige/politically appealing routes
unsupporatble on a cost/benefit basis.

TMO