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Forced To Buy Canadian  
User currently offlineMckennasmall From Canada, joined Dec 2003, 249 posts, RR: 1
Posted (10 years 11 months 4 weeks 6 hours ago) and read 3372 times:

I have a lot of family that works in management in Air Canada and they have told me that the government had force Air Canada to purchase Canadian or else there would be taxes going up that would threaten Air Canada. I would like to get other people's opinions. People I know that work very high in Air Canada management say they were forced.



Cheers Mike

46 replies: All unread, showing first 25:
 
User currently offlineSPLOBKrakow From Poland, joined Sep 2003, 105 posts, RR: 0
Reply 1, posted (10 years 11 months 4 weeks 5 hours ago) and read 3306 times:

If this is true then I fully agree with the government.
Lets keep Canadian money in Canada, why invest in other countires and forgin companies, when our own companies are struggling. If Air Canada did not buy any Canadian aircraft they would have gone under, the gov would make sure they did.


User currently offlineGoose From Canada, joined Aug 2003, 1840 posts, RR: 15
Reply 2, posted (10 years 11 months 4 weeks 5 hours ago) and read 3288 times:

Krakow; I think McKenna is speaking of the common myth that Air Canada was forced to buy Canadi>n Airlines, not its recent order of Bombardier RJs.

As someone who worked with Canadi>n, I don't see how someone could think that Air Canada was forced to purchase that company. Air Canada did it of its own accord - almost gleefully so - after the Feds had slammed the door shut on a AMR "rescue" of CP in 1999.

For years AC had drooled over CP's Asian routes, and saw a opportunity to accomplish a goal which had been the stated objective of its board of directors for nearly a decade; to run Canadi>n out of business.



"Talk to me, Goose..."
User currently offlinePVD757 From United States of America, joined Aug 2003, 3420 posts, RR: 16
Reply 3, posted (10 years 11 months 4 weeks 4 hours ago) and read 3261 times:

As much as i like the government extortion angle, I can't buy into it. If the Canadian government does something like this, they would wind up running an airline because Air Canada would go under for sure. No offense to Westjet, but how pathetic that Air Canada cannot make money against little or no competition.

User currently offlineYOW4NOW From Canada, joined Jan 2004, 45 posts, RR: 0
Reply 4, posted (10 years 11 months 4 weeks 4 hours ago) and read 3230 times:

I doubt the federal government would have forced Air Canada to Buy Canadian Airlines. I suspect that had Canadian been forced into Bankruptcy, the Feds would have put them on their corporate welfare system to allow them some breathing room.

History only shows that in Canada, one Airline buying up another usually leads to itself being bought out. After all the buy-outs, Air Canada was the sole remaining of the older "dominant" Carriers. Think about it. CP bought Nordair and Wardair. CP continued to struggle. Pacific Western bought CP and became Canadian. They struggled. Air Canada buys Canadian and now their struggling.

Sad to say, but in all likelihod it would have been better for CP to have let Nordair and later Wardair to falter, for Pacific Western to have let CP falter and Air Canada to have let Canadian falter. I'm sure had none of these carriers tried to get too big for too quick, we'd be seeing a few more "National" carriers in Canada. Albeit all smaller in size, rather competitive nonetheless.

I remember watching Nordair, Pacific Western, Canadian Pacific, Air Canada etc fly into my humble hometown. No more of that! Air Canada, some WestJet and that's it! Except for a few flights from US, AA and CO.

Regards!


User currently offlineYyz717 From Canada, joined Sep 2001, 16370 posts, RR: 56
Reply 5, posted (10 years 11 months 4 weeks 4 hours ago) and read 3214 times:

NO government can FORCE any private sector company to buy anything.

AC bought CP on its own free will....just one of many strategic errors by that error-prone buffoon Milton and his useless mgmt team.




Panam, TWA, Ansett, Eastern.......AC next? Might be good for Canada.
User currently offlineMckennasmall From Canada, joined Dec 2003, 249 posts, RR: 1
Reply 6, posted (10 years 11 months 3 weeks 6 days 19 hours ago) and read 3080 times:

I know no airline can be forced to buy a company but when you are told by the goverment if you do not buy this company we will raise tax's in Canada for aviaton and on aviation gas prices if you do not buy canadian or if you buy canadian you will get better tax rates, asian routes and we will not be hasseling you. I have been told this by friends of mine who are mangement in Air Canada. I could be wrong it is what I have been told.


cheers mike


User currently offlineGreg From United Kingdom, joined May 2005, 0 posts, RR: 0
Reply 7, posted (10 years 11 months 3 weeks 6 days 19 hours ago) and read 3032 times:

Whether they were forced or not...the order came out right. For 70 seats, the EMB170's estimated cost is more expensive to operate than the 86 seat CRJ705 (though they will fly it with 75 seats). Apparently, enough to outweigh even common type rating. A healthy discount from a large Canadian employer was icing on the cake.

I think the EMB190/95 was very competitive with the 717.


User currently offlineCanadi>nBoy From , joined Dec 1969, posts, RR:
Reply 8, posted (10 years 11 months 3 weeks 6 days 19 hours ago) and read 2965 times:

"For years AC had drooled over CP's Asian routes, and saw a opportunity to accomplish a goal which had been the stated objective of its board of directors for nearly a decade; to run Canadi>n out of business."

That's it in a nutshell. As some have pointed out here, Ottawa did not/can not "force" a private company to purchase another. Miltie wanted it all, and now he's paying the price. unfortunately, the AC and ex-CP personnel are also paying a price for the Canadi>n takeover.


User currently offlineSPLOBKrakow From Poland, joined Sep 2003, 105 posts, RR: 0
Reply 9, posted (10 years 11 months 3 weeks 6 days 19 hours ago) and read 2904 times:

Sorry ....... this who time i thought he was speaking of canadian products not Canadian Airlines.



User currently offlineCO737800 From Canada, joined Dec 2003, 545 posts, RR: 1
Reply 10, posted (10 years 11 months 3 weeks 6 days 18 hours ago) and read 2843 times:

I wish that Onex would have bought both Airlines. It would not be like it is now, and I hope they would have kept the Canadian Airlines service.

User currently offlineGoose From Canada, joined Aug 2003, 1840 posts, RR: 15
Reply 11, posted (10 years 11 months 3 weeks 6 days 16 hours ago) and read 2752 times:

I know no airline can be forced to buy a company but when you are told by the goverment if you do not buy this company we will raise tax's in Canada for aviaton and on aviation gas prices if you do not buy canadian or if you buy canadian you will get better tax rates, asian routes and we will not be hasseling you. I have been told this by friends of mine who are mangement in Air Canada. I could be wrong it is what I have been told.

--

If that were true, none of those promises indeed happened - gas prices went up, tax rates went up, and the Government appointed a ombudsman to handle complaints from taxpayers from the airline industry - and most of those complaints come from Air Canada customers.

Many of those things mentioned - gas prices, namely... but also some of the taxes - the government cannot makes promises about, especially not to a company like Air Canada, or would face serious repercussions about favoritism from other companies in the industry. The gas prices, the government cannot really control, either.....

I know it's tempting for some folks, especially AC employees, when looking at the current state of their company, to point fingers and say that "it's all Canadi>n's fault." However, that would be wrong - the combined debt of the two companies post-merger was something to the tune of $13-15 billion dollars. Canadi>n had brought around $5-7 billion dollars in debt to that figure. The rest, Air Canada made on its own.

After the ONEX deal fell through, Air Canada rebounded and made a move to buy out Canadi>n because they figured the time was ripe - and were deathly afraid that AMR would make another move to purchase a large stake in Canadi>n (that assumption was correct), rescueing them from immediate financial difficulties and perhaps giving AC some real headaches, especially in the West.

That, coupled with CP's rising image (CP had won a Best North American Airline award that year, and was going through the Proud Wings corporate makeover) struck fear into AC's management of a new, revitalized CP that would be able to at least close the gap between the two carriers, in terms of market share.

Realistically, I cannot see a board of directors - and the shareholders for that matter - accepting putting an attractive share-price offer to CP's shareholders, and take on so much debt, simply to please the Canadian government. Air Canada is a business....

[Edited 2004-01-06 19:56:36]


"Talk to me, Goose..."
User currently offlineYyz717 From Canada, joined Sep 2001, 16370 posts, RR: 56
Reply 12, posted (10 years 11 months 3 weeks 6 days 16 hours ago) and read 2722 times:

Ironically, had AC refused to buy CP.....CP would likely have gone bankrupt. AC could then have picked up the Asia routes quickly WITHOUT having to take on the CP staff, unions, motley fleet etc.

Exactly the same scenario occurred in Australia in 2000. The Aus govt asked Qantas to buy ailing Ansett.....QF refused and Ansett died. QF has had strong financial performance ever since.




Panam, TWA, Ansett, Eastern.......AC next? Might be good for Canada.
User currently offlineWhiteguy From Canada, joined Nov 2003, 840 posts, RR: 0
Reply 13, posted (10 years 11 months 3 weeks 6 days 16 hours ago) and read 2713 times:

Of course AC was forced to buy CP. The canadian government was pissed because their nice little deal that they had set up with Onex fell through. Why would Milton willingly buy CP, look at the state they were in. It would be like Westjet turning around and buying AC tomorrow. Hey lets start that rumor. Yeah AC may have had some debt before the takeover but they were also making record profits up until 2000!

User currently offlineYyz717 From Canada, joined Sep 2001, 16370 posts, RR: 56
Reply 14, posted (10 years 11 months 3 weeks 6 days 16 hours ago) and read 2674 times:

Of course AC was forced to buy CP.

Forced by who? The Cdn govt cannot force such things. AC bought CP freely & of its own will.

Why would Milton willingly buy CP, look at the state they were in.

It was the dot-com boom, AC was marginally profitable, and AC wanted CP's Asian routes.






Panam, TWA, Ansett, Eastern.......AC next? Might be good for Canada.
User currently offlineWhiteguy From Canada, joined Nov 2003, 840 posts, RR: 0
Reply 15, posted (10 years 11 months 3 weeks 6 days 16 hours ago) and read 2634 times:

AC actually bought CP for less money than they offered for their Asian routes. Yes the cdn gov and they did. They are the ones that started everything by relaxing the rules and had their hands in the Onex bid.

User currently offlineGoose From Canada, joined Aug 2003, 1840 posts, RR: 15
Reply 16, posted (10 years 11 months 3 weeks 6 days 16 hours ago) and read 2620 times:

Yeah AC may have had some debt before the takeover but they were also making record profits up until 2000!

Around a billion dollars or so of their debts on new aircraft - like the A330s and A340s - were due to be paid starting in January 2000..... doubtless their profitability would've taken a serious hit, even if they had not purchased CP.

Again, AC's Board of Directors' responsibility is to their shareholders. If they had been "forced," as I've heard people say, by the Canadian feds to buy CP.... then they'd have to answer to their shareholders about why they had made such a foolhardy business decision. The Board would be replaced if the shareholders didn't go along.

But that didn't happen - indeed, the Board and shareholders approved the offering of a very attractive share purchase price to CP, and willingly took on a large amount of debt and unionized employees. Those decisions, doubtless, have done far worse to Air Canada's financial state than any actions taken by the Government against them, could have.

Again, AC wanted to buy CP primarily for its Asian routes and to a slightly lesser degree to stroke its collective corporate ego - by putting CP out of business.



"Talk to me, Goose..."
User currently offlineCanadi>nBoy From , joined Dec 1969, posts, RR:
Reply 17, posted (10 years 11 months 3 weeks 6 days 16 hours ago) and read 2597 times:

Whiteguy, true, the Canadian Government did in fact relax the rules and widened the perimeters re purchasing CP, yet in the end, it was ultimately Robert Milton and the AC board who made the horrific decision to buy CP.

A agree with those here who stated AC should have watched the Goose "die"
(as much as I personally and truly hate to say that) and then surrounded it like vultures, picking the pieces (Asia network) that it so desired. Qantas made the correct decision re Ansett, no doubt they cast their collective gaze towards Canada and saw the results/fallout from the AC purchase.


User currently offlineGoose From Canada, joined Aug 2003, 1840 posts, RR: 15
Reply 18, posted (10 years 11 months 3 weeks 6 days 15 hours ago) and read 2588 times:

Oh, and as for debt... looks like I was in error;

Quote:
Prior to 1999, Air Canada was dominant, but not oppressively so. Regional carriers provided feeder services to both it and Canadian. Contrary to popular myth, Air Canada was not "forced" to absorb Canadian Airlines -- in fact, it fought tooth and nail for the merger. President Bob Milton also successfully fought off an attempt -- by Gerry Schwartz and Onex Corp., in conjunction with American Airlines -- to enter Canada's airline industry. Mr. Schwartz has repeatedly expressed his relief at losing that fight.

Having successfully married Canadian Airlines' market share to its own, Air Canada set out to manage the combined debt of both airlines by absolutely dominating the marketplace in a bid to manage prices. The gambit did not work. Feisty competitors like WestJet in the west and Air Labrador and Provincial Airlines in the east refused to fold in the face of price wars. Air Canada responded by creating new, low-cost carriers of its own, and Tango and Jazz were born. But the bleeding continued. Before the merger, Air Canada already had $4-billion of debt. Canadian brought another $7-billion of debt to Air Canada's balance sheet. Another $2-billion of debt has been accumulated since 1999.


Source:
http://www.globeandmail.com/servlet/ArticleNews/TPStory/LAC/20030408/COTOBIN/Comment/Idx



"Talk to me, Goose..."
User currently offlineWhiteguy From Canada, joined Nov 2003, 840 posts, RR: 0
Reply 19, posted (10 years 11 months 3 weeks 6 days 15 hours ago) and read 2576 times:

AC did not willingly taken all unionized employees. As soon as the take over was done the government came out with the new list of rules for AC and one was that they were not allowed to layoff any employees for 2 years. So how can you say the gov doesn't have their hands in the takeover.

User currently offlineGoose From Canada, joined Aug 2003, 1840 posts, RR: 15
Reply 20, posted (10 years 11 months 3 weeks 6 days 15 hours ago) and read 2543 times:

A agree with those here who stated AC should have watched the Goose "die"
(as much as I personally and truly hate to say that) and then surrounded it like vultures, picking the pieces (Asia network) that it so desired. Qantas made the correct decision re Ansett, no doubt they cast their collective gaze towards Canada and saw the results/fallout from the AC purchase.


There were some doubts in the minds of many that the Goose would've died at all if there hadn't been a merger. We'll never know, but there were some very long discussions with AMR and Ottawa about opening the doors on foreign ownership.... right up until the eve of the merger with AC. Realistically, I have quite a bit of doubt that there could've been much done by a patron like AMR to save CP, but as I said, that's the road not travelled....

But the fact is that Air Canada was very afraid that AMR would put its very deep pockets behind Canadi>n, because they figured that Ottawa would loosen restrictions on foreign ownership sooner or later. That was another reason they pushed for the merger.....



"Talk to me, Goose..."
User currently offlineWhiteguy From Canada, joined Nov 2003, 840 posts, RR: 0
Reply 21, posted (10 years 11 months 3 weeks 6 days 15 hours ago) and read 2524 times:

Goose

Wow if its in the paper it must be true. Yes we had just bought the A330s and A340s but we had BOUGHT them. Now everything is leased, a good old canadi>n tradition.


User currently offlineCanadi>nBoy From , joined Dec 1969, posts, RR:
Reply 22, posted (10 years 11 months 3 weeks 6 days 15 hours ago) and read 2511 times:

Thanks for the above info, Goose. Perhaps Miltie feared AMR and Schwartz would relaunch an aggressive campaign, or AMR (as stated) would invest and "pump up" CP even more re ops and image. Still, to purchase a debtload of 4 billion......aye yi yi, NOT to mention a fleet of mostly increasingly archaic equipment type (B737, DC-10-30). Don't get me wrong here, I am not slinging mud at Canadi>n.

Here's another dichotomy. AC purchases CP. AC plans to phase out older CP equipment types from the fleet. AC plans to reduce the number of duplications in flight ops (ex-CP). AC KNOWS they have the "no lay-offs" policy agreement to adhere to. Could Miltie do the math? Could the AC board do the math? This equation equals surplus employees with a combined heightened debtload, and rising daily.


User currently offlineGoose From Canada, joined Aug 2003, 1840 posts, RR: 15
Reply 23, posted (10 years 11 months 3 weeks 6 days 15 hours ago) and read 2503 times:

AC did not willingly taken all unionized employees. As soon as the take over was done the government came out with the new list of rules for AC and one was that they were not allowed to layoff any employees for 2 years. So how can you say the gov doesn't have their hands in the takeover.

Air Canada knew that before they signed the cheque, figuratively speaking.

You have a source for the Federal-imposed no-layoff clause on CP's purchase? I've heard the rumours from AC guys for a good many years, but they have never told me where to find information about it, whether it be from Air Canada themselves or another source.

The only no-layoff clauses I'm aware of with AC are those that they've willingly made with some of their own Unions, as stated in their contracts. That's one of the major stumbling blocks in their restructuring plans......

http://cbc.ca/stories/2003/02/06/aircanada_030206



"Talk to me, Goose..."
User currently offlineGoose From Canada, joined Aug 2003, 1840 posts, RR: 15
Reply 24, posted (10 years 11 months 3 weeks 6 days 15 hours ago) and read 2483 times:

Thanks for the above info, Goose. Perhaps Miltie feared AMR and Schwartz would relaunch an aggressive campaign, or AMR (as stated) would invest and "pump up" CP even more re ops and image. Still, to purchase a debtload of 4 billion......aye yi yi, NOT to mention a fleet of mostly increasingly archaic equipment type (B737, DC-10-30). Don't get me wrong here, I am not slinging mud at Canadi>n.


AMR and AA drooled over CP's TransPac routes almost as much as AC did; but realistically, AA had no means to enter YVR and use it as a Trans-Pacific gateway, legally, without Canadi>n. At least, that's how I gathered it. AA didn't have the routes in the Pacific which UA and NW did, but CP did. That was a major reason they invested in CP in the first place.

As for the fleet.... well, CP was moving to a "five-type fleet" by 2002 (if I remember the memos).... and the DC-10s were gone before the merger, replaced by 763s. The 732s were perfectly suitable and still had good years left in them - I mean, look at WestJet's success with them.



"Talk to me, Goose..."
25 Canadi>nBoy : Actually, Goose, Ottawa did in fact "enforce" this no-layoff policy with AC re CP employees. Milton and the board agreed to adhere to it (and subseque
26 Canadi>nBoy : "Wow if its in the paper it must be true. Yes we had just bought the A330s and A340s but we had BOUGHT them. Now everything is leased, a good old cana
27 Canadi>nBoy : "As for the fleet.... well, CP was moving to a "five-type fleet" by 2002 (if I remember the memos).... and the DC-10s were gone before the merger, rep
28 Post contains images Goose : Actually, Goose, Ottawa did in fact "enforce" this no-layoff policy with AC re CP employees. Milton and the board agreed to adhere to it (and subseque
29 Post contains images Canadi>nBoy : "If it's indeed true that a few of AC's own unions have "no-layoff" clauses in their contracts anyway, having Ottawa enforce a seperate but entirely c
30 Whiteguy : Goose, Actually all the Hudson ground handlers were given priority to the AC jobs and most of them took the offer. Alot of them are still at AC barely
31 Yyz717 : I heard that after CP received back some of their DC-10-30's from UA (swapped for UA's DC-10-10's), CP maintenance were appalled at their condition, a
32 Canadi>nBoy : Yes, I heard about the PIA DC-10's horrible condition upon Canadi>n receiving them, but don't you find it tad rather strange that the CP people did no
33 Mckennasmall : Why trade with PIA you know the quality of the service. Why
34 Goose : Actually all the Hudson ground handlers were given priority to the AC jobs and most of them took the offer. Alot of them are still at AC barely. I ask
35 Whiteguy : The Hudsons guys were all put behind the AC guys in seniority yes, that sounds fair they came from a different company. They were above all the other
36 Bmacleod : Forced? No one forces anyone into doing anything...... Forget about goverment "pressuring" AC to buy Canadian. Our regional jets are the best in the w
37 Whiteguy : Bmacleod Did you actually read what this topic was about.
38 Post contains images Goose : Forced? Forget about goverment "pressuring" AC to buy Canadian. Our regional jets are the best in the world and that's why AC chose Bombardier and our
39 Bmacleod : Then why didn't Mckennasmall specify "Canadi>n" in his opening statement? That would've made it clearer.
40 Whiteguy : He was to excited doing his other 50 postings!!
41 Mckennasmall : Sorry about not stating it. I was writing on one of those airport computers and i was rushing sorry about that .
42 Post contains images Goose : Hah! Bingo, Whiteguy... Well, he didn't specify that he was talking about the RJs at all, people just assumed that. I don't think he's been around the
43 Canadi>nBoy : Well well, aren't you guys warm and welcoming to someone who has an interest in civil aviation. Nice to know this person can come on here, and in resp
44 Canadi>nBoy : "Sorry about not stating it. I was writing on one of those airport computers and i was rushing sorry about that." Mckennasmall, you have nothing to ap
45 Goose : Indeed, CPBoy, at one time all of us knew squat about this subject. I don't think anyone here is ridiculing the fact that he's asking questions. That'
46 Post contains images Canadi>nBoy : Okay, so the guy is an eager beaver today. Besides, his topics aren't really that "downright silly", as many have responded to his questions, unless t
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