From the Toronto Star
Air Canada to sell more jets to raise $565M
Airline also announces two major labour deals, finance arrangement
From Canadian Press
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Air Canada announced two major labour deals Friday and a financing arrangement with a major leasing company that will put $565 million into the money-losing airline's coffers.
In separate agreements that will ensure peace with two of its important unions, the Montreal airline said:
— Pilots who fly for Air Canada Regional, a subsidiary that operates Air Ontario, Air Nova and AirBC, have ratified a new contract, paving the way for an integration of the three airlines' operations.
— Human Resources Development Canada has approved a work sharing program that will allow Air Canada to cut labour costs in co-operation with the Canadian Auto Workers union, which represents about 7,700 of Air Canada employees.
Under the sale-leaseback agreement, Air Canada will sell 16 Airbus A320 and one A319 jet to GE Capital Aviation Services Inc. The airline will then lease back the planes, paying GE Capital for use of the aircraft over several years.
The deal was Air Canada's latest move to increase available cash to cope with an industrywide downturn that began last year when the economy began to weaken.
The trend was made worse with a sudden, dramatic drop in revenues following the Sept. 11 terrorist hijackings.
In late September, the airline said it had to cut costs by 20 per cent and attempted, unsuccessfully, to override a no-layoff clause in its contract with CAW by claiming its financial situation was so dire that it should be excused from the agreement.
There were also fears in October that Air Canada could be forced to seek court protection from its creditors, although the airline and analysts who monitor the company's finances always insisted it still had enough liquidity to last until at least mid-2002.
"This transaction demonstrates Air Canada's ability to raise liquidity in these difficult times and is consistent with the airline's objective of maintaining stability in the current economic environment," Rob Peterson, Air Canada's executive vice-president and chief financial officer, said in a statement Firday.
"While further cost reductions are still required, we remain confident that the company's liquidity requirements will continue to be met in light of current and anticipated needs."
For the first nine months of this year, Air Canada lost $874 million, or $7.27 per share, on revenues of $7.5 billion. That compares with a $192 million profit, or $1.38 a share, from $6.7 billion in revenues for the same period of 2000.
The labour agreements announced Friday were the latest that should allow Air Canada to lower costs and integrate various operations acquired with the 1999 takeover of Canadian Airlines International.
Members of the Air Line Pilots Association, an affiliate of a U.S. union, have ratified a unified seniority list and new contract with Air Canada Regional, allowing it to integrate operations of its various component airlines.
"Despite the difficult economic climate that has hit the airline industry — particularly hard in Canada — we were able to reach an agreement that meets the needs our of our pilots across the country," Capt. Steve Linthwaite, chairman of the ALPA governing body, said in a statement.
"Bringing together over 1500 pilots under one seniority list and one contract is a monumental task; add to that the tumultuous events that have jolted the world these past few months, and at times it seemed nearly impossible.
"We are pleased with the results of the collective bargaining process and look forward to the full integration of Air Canada Regional," Linthwaite said.
The Canadian Auto Workers, which represents Air Canada ticket counter agents at airports and the people who answer phones at the airline's call centres, also hailed the federal government's approval of a work sharing agreement.
Air Canada (TSE: AC) originally issued layoff notices in September for 1,281 employees represented by the CAW, even though the union has a no-layoff clause in its contract.
The union immediately challenged the layoffs at the Canada Industrial Relations Board, which ordered Air Canada and CAW to negotiate alternative measures, such as early retirements instead of layoffs.
Under the federal work sharing program, about 2,100 CAW volunteers will work for four days a week and be paid a reduced income for the fifth day, with the money coming from the federal employment insurance program.