B747-437B
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Air Canada Releases Emergence And Business Plans

Thu Jul 01, 2004 2:35 pm

Air Canada on Wednesday evening filed with the Ontario Superior Court of Justice their plan to emerge from creditor protection under the Companies Creditor Arrangement Act on September 30, 2004.

The brief summary of the plan from filings and other public statements is that the airline will be recapitalized via a $850m rights offering to secured and unsecured creditors to be guaranteed by Deutsche Bank (to constitute approx. 42.06% of the equity in the new corporation) plus a capital investment of $250m to be provided by Cerberus Investment (to constitute approx. 9.16% of the equity in the new corporation). Short term exit financing loan will be provided by GE Capital. The airline will emerge with ~$2 billion in unrestricted cash.

The company sees an annual capacity increase of 4% to YE2004 and 1% to YE2005. Total revenues are projected to increase 6% to YE2004 and 1% to YE2005. Whereas unit revenues are projected to remain flat, cost savings and efficiencies show a projected improvement in EBITDAR of 64% to YE2004 and 47% to YE2005.

Operationally, the airline will see the termination of its ZIP subsidiary by September 2004 and the incorporation of those operations into mainline. The Boeing 737-200s that constitute ZIP's fleet shall be removed from service entirely by December 2004. All remaining Boeing 747-400 aircraft and 1 additional Boeing 767-200 will also be removed from service by October 2004. Two Airbus 340-500 aircraft will be introduced into the fleet in 2004. Jazz will see the removal of 7 BAe146 aircraft and 3 DHC-8-100 aircraft from its fleet. Jazz will be converted from a wholly owned subsidiary to a limited partnership within the new corporate structure.

In 2005, Air Canada will see the delivery of the first 2 of an ultimate 44 Embraer 190 aircraft for mainline as well as 15 Canadair CRJ-700 regional jets for Jazz. Air Canada will also begin the process of transferring 25 Canadair CRJ-200 regional jets from Air Canada to Jazz to be completed in 2006. The remaining BAe146 aircraft will also be removed from the Jazz fleet in early 2005. Mainline Airbus 320/Airbus 319 fleet will be reduced by 3/0 airframes in 2005, 2/2 airframes in 2006 and 5/0 airframes in 2007 as aircraft are returned to lessor at the termination of lease period.

Total fleet projections show Air Canada/Jazz to operate 199/93 aircraft at YE2004, 193/111 aircraft at YE2005, 183/131 aircraft at YE2006 and 200/125 aircraft at YE2007.

Air Canada Cargo and Aeroplan will both be incorporated as limited partnerships under the new parent corporate structure.

Passenger revenues are currently accrued in the ratio of 39% Domestic, 25% Transborder, 16% Transatlantic, 10% Transpacific and 10% from other operations. Future growth is expected to be seen in Latin American operations as well as in markets with a high volume VFR traffic segment. The airline will continue to maintain and operate hubs in Toronto, Montreal and Vancouver.

The complete document (426 pages, 11.6 MB PDF file) can be downloaded from here.

[Edited 2004-07-01 07:39:44]
"The A340-300 may boast a long range, but the A340 is underpowered" -- Robert Milton, CEO - Air Canada
 
Boeing757/767
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RE: Air Canada Releases Emergence And Business Plans

Thu Jul 01, 2004 10:16 pm

Interesting stuff. Thanks for posting!
Free-thinking, left-leaning secularist
 
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yyz717
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RE: Air Canada Releases Emergence And Business Plans

Thu Jul 01, 2004 11:56 pm

Given how AC has fallen into bankruptcy and completely missed every forecast for 5+ years, how much credence will this have with investors and creditors? Don't forget, it's the same incompetent AC mgmt team that drove AC into bankruptcy that has prepared this so-called emergence business plan.

Have the revenue forecasts incorporated the sliding passengers yields and growth of LCC's?

Is there a dynamic or contingency-based plan for every 1% of revenue goal missed?

Why is AC waiting until 2006 to tfr the CRJ fleet to Jazz? Why not do it, say, tomorrow on July 2nd, 2004?

Upon re-emergence, I am still predicting that AC miss never make a single forecast or business plan, and will fall back into bankruptcy again within 2 years.

Let AC liquidate now. It's time to start over.



I dumped at the gybe mark in strong winds when I looked up at a Porter Q400 on finals. Can't stop spotting.
 
fraT
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RE: Air Canada Releases Emergence And Business Plans

Fri Jul 02, 2004 12:47 am

How will the cargo capacity of the 744 combies replaced? AFAIK FRa will get more 763s which means an immense reduction of cargo space.
Also the passenger capacity will be reduced by approx. one third (744 to 763). Does AC plan to buy or lease more aircraft than the two A345?
 
aad665
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RE: Air Canada Releases Emergence And Business Plans

Fri Jul 02, 2004 12:56 am

Hi,

I read the whole the plan. An interesting point is AC would like to earn more revenue from International flight. If you read carefully the plan (p.137), they plan to reduce widebody fleet.

How the will achieve it...less planes, more flight???

Regards,

aad665


Air Canada's mainline fleet, excluding Jazz aircraft, at March 31, 2004, and the planned fleet for
2004 to 2007 are as described below:
Total
Number
of Aircraft
Mar 31/04
Number
of
Operating
Aircraft
Mar 31/04
Planned
Operating
Fleet
Dec 31/04
Planned
Fleet
Dec 31/05

Planned
Fleet
Dec 31/06
Planned
Fleet
Dec 31/07
Widebody Aircraft
Airbus A340-300 9 9 9 9 9 9
Airbus A340-500 - - 2 2 2 2
Airbus A330-300 8 8 8 8 8 8
Boeing 747-400 Combi 3 3 0 0 0 0
Boeing 747-200 3 0 0 0 0 0
Boeing 767-300 ER 30 30 30 30 29 29
Boeing 767-200 20 13 12 10 9 7
Source p.137
 
northstardc4m
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RE: Air Canada Releases Emergence And Business Plans

Fri Jul 02, 2004 1:07 am

well, actually, they arent reducing the international widebody fleet that much.

The 767-200s they are removing from service are primarily the remaining non-ER models which are use on domestic, Carribean and US services and are being replaced by bumped A32X series.

The only real reduction in the long haul fleet is the parking of the 747-400Ms. AC may also be begining contracted all-cargo operations so im sure that would pick up the cargo capacity (ive not heard much about this lately, anyone know if its on or off?). The 74Es arent much bigger passenger capacity wise than the A333/343, so the actual capacity reduction is minimal, since 2 more 343s will be coming available as they are knocked off the YYZ-YVR-HKG run by the 345s flying YYZ-HKG. Those 343s can probably replace the 333s on trans-pacific service and those 333s can operate to LHR and F RA on the current 74E flights.

Also the A340-600s are officially still on order... but not until 2009 or so, assuming they dont get cancelled/converted.

The plan seems good to me, though i would of liked to see the CRJs transfered sooner.
Those who would give up Essential Liberty to purchase a little Temporary Safety, deserve neither Liberty nor Safety.
 
B747-437B
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RE: Air Canada Releases Emergence And Business Plans

Fri Jul 02, 2004 1:13 am

Air Canada's mainline fleet, excluding Jazz aircraft, at March 31, 2004, and the planned fleet for 2004 to 2007 are as described

To make it easier on all concerned :

"The A340-300 may boast a long range, but the A340 is underpowered" -- Robert Milton, CEO - Air Canada
 
greasespot
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RE: Air Canada Releases Emergence And Business Plans

Fri Jul 02, 2004 1:21 am

It will take that long because even thought they are the same company( sort off) they still have to do all the regulatory and audit of the paperwork and get the maintenance program for them approved. There is a lot more to transferring airplanes then just signing the back of the registration.

Greasespot
Sometimes all you can do is look them in the eye and ask " how much did your mom drink when she was pregnant with you?"
 
Qb001
Posts: 1923
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RE: Air Canada Releases Emergence And Business Plans

Fri Jul 02, 2004 10:25 am

To me, this is not a business plan, this is merely a glorified reorganization. In other words, it's more of the same.

Getting rid of Zip is a good thing. But as for Jazz and AC, how are they going to be positioned on the market? Will Jazz become some sort of LCC? Or will it still be used only to serve the smaller, remote markets? And will AC be more focus on international/US routes, where it is somewhat competitive? Or will it attempt to go head to head with WestJet and JetsGo? And if so, how will it reconcile the cost structure of a LCC with that of a mainline?

I don't see in this "business plan" the kind of radical changes AC needs to accomplish in order to survive.

Jazz and AC as distinct entities is a good start. But I believe Jazz should be made to go head to head with the other LCCs, while AC should be more focused on US/International routes.

I'm not really optimistic about the outcome of this "business plan"...
Never let the facts get in the way of a good theory.
 
robsawatsky
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RE: Air Canada Releases Emergence And Business Plans

Sat Jul 03, 2004 6:37 am

There is no indication that Jazz will be anything other than it is now, AC's regional carrier. As for mainline, they have previously stated their intention to increase international/transborder service and still compete with Canadian LCC's on the domestic front.

Unfortunately, the document is deep in technical business arrangements and weak on strategic and tactical competitive details.
 
Olympus69
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RE: Air Canada Releases Emergence And Business Plans

Sat Jul 03, 2004 6:54 am

Jazz must be going to get some of ACs mainline routes. All the CRJs will have been turned over to them by the end of next year and this will include the new CRJ-705s which will arrive in 2005.

As for competitive strategic and tactical plans - why would they want to reveal them?

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