I'm just wondering how long it's going to take before the AC
bargaining divisions start dancing the war dance with Milton and the board and Mr. Li.
Does this gentleman REALLY know what he's getting into with AC
and the unions?
Speaking of Milton, I can't believe the gall of this man for welcoming Li (nothing against Li) and praising him for the positive change, growth and input Li will bring to Air Canada? Huh? Err......effective statement, seeing as how it comes from the man who could not keep his Canadian monopoly carrier flying in the black.
Re these bonuses and share agreements. Did Milton and Rovinescu learn nothing from the AA
- Donald Carty debacle a short while ago?
From The Globe & Mail, November 10, 2003:
Air Canada has chosen Hong Kong businessman Victor Li to buy a controlling stake in the company for $650-million -- funds that will help the insolvent airline to emerge from bankruptcy protection next year.
The airline's top two executives each stand to receive more than $20-million in stock as part the deal, which was approved this weekend by the company's board of directors.
A company controlled by Mr. Li will pay $650-million to receive 31 per cent of the airline's fully diluted common shares.
Robert Milton, Air Canada's president and chief executive officer, and Calin Rovinescu, the airline's chief restructuring officer, will each receive 1 per cent of the airline's shares as a retention bonus, to be paid over four years out of Mr. Li's stake.
Representatives of the airline's unionized employees, who have given the company hundreds of millions of dollars in concessions through the restructuring, were livid yesterday when they learned about the executive payouts.
"I think it's going to be time for the unions to flex their muscles a little bit and say enough is enough," said Richard Nolan, a vice-president with the Canadian Union of Public Employees, which represents the airline's flight attendants.
Mr. Nolan said CUPE will consider all its options, including whether to pull out of the concessions it agreed to in June.
"We had a clause saying we would be treated the same as all other employee groups," Mr. Nolan said.
"And management, as far as I'm concerned, are also employees of this airline. If they get a special deal, so do we; I look forward to my 1 per cent."
Based on the value paid by Trinity Time Investments, a company controlled by Mr. Li, 1 per cent of the airline's shares is worth about $21-million. That value could rise or fall based on the trading value of the airline's shares.
Mr. Li, who has Canadian citizenship, is the son of legendary Hong Kong businessman Li Ka-shing. The Li family, which controls Calgary-based Husky Energy Inc., is also involved in real estate, media, hotels and telecommunications. Air Canada said the investment will be funded from Mr. Li's personal financial resources, but may include investment from other family holdings and foundations.
The deal, which is subject to approval by the courts and the company's creditors, would maintain current executive management, but result in a change to the company's board of directors.
Air Canada said the deal will leave about 56 per cent of the company's fully diluted equity to creditors, who are owed more than $9-billion.
The creditors will have to buy some of those shares through a rights offering, which will generate an additional $450-million to fund the airline's emergence from bankruptcy protection.
The agreement with Mr. Li will all but wipe out existing shareholders, giving them just 0.01 per cent of the company. This values the shares at less than 1 cent each, well below Friday's close of $1.08.
The deal is conditional on a number of factors, including the resolution, in a matter satisfactory to Trinity Time of Air Canada's pension plan difficulties. The airline is on the hook for $1.5-billion.
Last week, Air Canada received firm bids from Trinity Time and Cerberus Capital Management LP
, the two equity finalists it identified in September.
The company said both finalists had made similar proposals to pay retention bonuses to the airline's top executives.
In addition to the stock to be granted over the next four years, the airline will also set aside 5 per cent of its float for stock options.
Otherwise, executive salaries and bonuses will not be any higher than those currently in effect, the airline said.
Jean Jallet, national president for the transportation division of the International Association of Machinists, said the management payouts could sour the company's efforts to reach further deals with employees on pensions and benefits.
"With all the concessions that we've given, it hardly seems fair that they would get a $20-million bonus," Mr. Jallet said.
"It will certainly have an impact on the other cost measures that they're looking at."
Buzz Hargrove, president of the Canadian Auto Workers union, which represents customer sales and service workers, said he's not surprised by the deal.
"The executives always do well, and the workers pay a hell of a penalty. . . .It's not proper, but it's no different from what anybody else does in business."
Airline officials knew the retention package would be controversial with its unions, according to a person close to the company.
"There's always somebody who's going to complain when anybody has a shot at making some money," the source said.
"I think by any conventional measure, if you were to say, is this management overpaid by North American airline standards, the answer is no, in fact they're underpaid."
Frank Sixt, an adviser to Mr. Li, said Trinity is excited to have been selected as equity plan sponsor to work with Air Canada to complete its restructuring.
Mr. Sixt is chief financial officer of Huchison Whampoa Ltd., which is controlled by the Li family. Mr. Sixt and Mr. Rovinescu attended the same high school and law school before they were recruited in 1978 to work at Stikeman Elliott, the law firm that is advising Air Canada on the restructuring.
The airline said its new board will consist of two members of management, five members to be appointed by Trinity, two to be appointed by Deutsche Bank and two others to be appointed by a selection committee that will include representatives of creditors.