Topic: Canada 3000 Granted Bankruptcy Protection
Posted 2001-11-09 05:04:36 and read 940 times.
Well it surely doesn't seem Canada 3000 was spared from the downturn and somehow I doubt that it will survive without extreme measures. Here's the report from the Globe and Mail:
By ROMA LUCIW
Globe and Mail Update
Canada 3000 Inc. said it will slash 1,500 jobs and cut 30 per cent of its capacity as part of a restructuring plan after the airline was granted bankruptcy protection from creditors Thursday.
The country's second biggest carrier, which earlier had filed for protection from creditors under federal bankruptcy laws, tried to reassure worried travellers to keep flying with the embattled airline.
"Delays in securing concessions essential to our restructuring have prompted the decision to seek the protection of the court," CEO Angus Kinnear said in a release. "This step allows us to continue serving the travelling public while restructuring our operations to ensure the long term viability of Canada 3000."
Earlier in the day, marathon talks between Canada 3000 and the union representing its 1,500 flight attendants broke off with the two sides failing to strike a deal, raising the possibility that the country's No. 2 carrier could be grounded.
The two sides had been engaged in intense negotiations throughout the night trying to agree on a plan that would keep the carrier in the skies. Canada 3000 had said it could be forced to file for bankruptcy protection unless it was able to slash its work force.
The airline, which is losing about $700,000 a day and has only a week or two of cash left, was granted protection by an Ontario court under the federal Companies' Creditors Arrangement Act late Thursday.
The act will give the airline time to negotiate with creditors, lenders, the government and unions while it tries to come up with a long-term survival plan.
Justice John Ground of Ontario Superior Court granted interim protection from creditors.
But one condition of the judge's approval was that — due to a hasty filing — any terms of his initial order could be challenged and amended at a Nov. 15 hearing.
Canada 3000's lawyers said the airline is also seeking Chapter 11 bankruptcy protection in California because the company has creditors in that U.S. state.
"We've got a downturn in the economy and we've got the events of Sept. 11 and most recently the (decline) of the Canadian dollar, (which) affects this organization's ability to pay some of its American lessors," Bill Burden, a lawyer for Canada 3000, told the court Thursday.
Mr. Burden said negotiations with various creditors and the government are continuing.
Lawyers for Canada 3000's creditors told the court they need the review period because many didn't have time to closely examine the company's court submissions.
Last month, Transport Minister David Collenette provided Canada 3000 with $75-million in loan guarantees to prevent it from running out of cash but the federal aid was conditional upon route cuts, pay cuts and layoffs at Canada 3000 or Royal, which it bought in January for $82-million in stock.
"As I have said previously, the government of Canada was prepared to consider a loan guarantee if that company met a number of conditions, including a restructuring plan, including investor injection and including a business plan that showed viability," Mr. Collenette said.
"Those conditions are still in place."
In its release Thursday, Canada 3000 said it was "highly confident of meeting the conditions to qualify for this assistance."
On Wednesday, the Canada Industrial Relations Board rejected the airline's application to shut down its Royal Aviation unit.
Like other carriers around the globe, Canada 3000 has been struggling in the wake of the Sept. 11 terrorist attacks in the United States. Air Canada has announced plans to cut 5,000 jobs, on top of 7,500 already announced over the past year, while Transat A.T. Inc. has announced 1,300 layoffs.
Earlier this week, Michel Leblanc, former Royal chief executive, offered to buy back parts of Royal Aviation, despite a bitter legal battle that has resulted from the merger.
Mr. Leblanc said on Wednesday he's willing to buy most of the former Royal fleet for $25-million in cash and assumption of $24-million worth of debt. But that offer carried a number of conditions, including the provision of a $30-million loan guarantee from Ottawa.
With a report from Terry Weber and CP