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Air Canada Makes Offer To Canadian

Sat Aug 21, 1999 6:01 am

This just in:

MONTREAL, August 20 /CNW/ - Air Canada today filed with the Minister of
Transport a copy of a proposal made to Canadian Airlines respecting the
restructuring of the Canadian airline industry.

The filing, which is required by the terms of the Order-in-Council made on
August 13,1999 pursuant to Section 47 of the Canada Transportation Act, covers a proposal made by Air Canada to Canadian Airlines prior to the Section 47 Order, and which continues to be open for acceptance.

Air Canada believes its offer presents solutions to all of the issues raised
under the Section 47 Order, and meets the needs of all stakeholders.

The results of a successful transaction would be:
- The purchase of the international routes currently operated by or
designated to Canadian Airlines, along with certain associated assets
and liabilities;
- Code-sharing opportunities for Canadian Airlines on Air Canada
international routes;
- The maintenance of domestic air competition, with the continued
participation of Canadian Airlines;
- Continued availability of the Star Alliance and OneWorld networks for
Canadian consumers;
- The liquidity that Canadian Airlines is seeking;
- Retention of Canadian Airlines' head office in Calgary;
- Substantial retention of employment for Canadian Airlines staff,
including the hiring by Air Canada of certain Canadian Airlines
employees associated with international operations.
The commercial terms of the proposal are confidential.
Air Canada is a fully-privatized airline offering customers over 700
destinations in more than 110 countries.
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Joined: Tue May 18, 1999 3:49 am

RE: Air Canada Makes Offer To Canadian

Sat Aug 21, 1999 6:47 am

So Canadi>n will no longer have --any-- international routes? What will support them--domestic routes alone?

Posts: 10104
Joined: Wed Aug 18, 1999 5:49 am

RE: Air Canada Makes Offer To Canadian

Sat Aug 21, 1999 7:08 am

Now this IS interesting. Whatever about the transatlantic routes, the Pacific routes are particularly valuable - Beijing, Hong Kong, TOKYO, Manila. It's going to be very interesting to see how OneWorld reacts, particularly as AC was a founding member of Star.

CP has quite a few slots at Heathrow and codeshares with BA. Oh, this will certainly throw a spanner in the works . . .

RE: Air Canada Makes Offer To Canadian

Sat Aug 21, 1999 8:25 am

Canadi>n has officially declined Air Canada's offer, stating as their reason that the international routes are the most profitable part of the operation. I guess we'll have to wait and see what happens. There has been talk of the Canadian government allowing greater foreign ownership (read: allowing AA to buy a bigger chunk), but I don't want to see how irrattionally American's pilots would react to that!
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Joined: Mon Aug 16, 1999 5:00 pm

RE: Air Canada Makes Offer To Canadian

Sat Aug 21, 1999 11:34 am

Now, that is what I call a GREAT IDEA! In the economics side, I think it is fantastic. Air Canada also covered all the issues (competition, lay offs, etc) that may steer conflicts in Ottawa. Great move again: The Canadian government is much more adverse than the American regarding competition. As time goes by after the merger, Air Canada may slowly close the extra offices, cut extra staff, etc.

The Open Skies Agreement between the US and Canada forces Canada to beef up its carriers to compete. I hope the Canadian Airlines' pride does not sour this idea.

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Joined: Tue Jul 06, 1999 10:52 am

RE: Air Canada Makes Offer To Canadian

Sat Aug 21, 1999 1:00 pm

I'm not surprised that CP said no, and yes the international flights are the most profitable. I expect that because of its affiliation with AA, the flights to the USA would remain, as they could be operated with narrow-body aircraft, and would not be subject to AC's offer.

As far as whether CP should or should not sell, I don't know. Their international routes are their ace in the hole. But I think CP is also faced with another issue. CP wants to be a major airline worldwide. Selling international routes would put an end to that. Also coming into play is their raison d'etre. As far as the government is concerned, their interest is to do with jobs and domestic (not international) competition. This is at odds with CP's interests. So think about that for a moment, about what all the airlines want. CP dreams of being #1. The government wants competition on domestic routes, and to save jobs. And AC wants international routes, but probably wouldn't mind CP staying around if they stay as only a national carrier, as it would solve alot of public relations problems, and accusations if AC were to have a monopoly.

So here's my solution. CP stays as a national carrier. For a cash sum, plus payments, AC would lease all international routes, and operate as code-share with CP. At the end of the lease, CP would have the right to resume its own service, sell the routes, or re-lease the routes. If CP folded, the routes would revert to AC. For aircraft, AC would take over the wide-bodies under a similar arrangement, with CP sub-leasing aircraft to AC, and in return perhaps a few A320's could be shifted to CP from AC for domestic service. Similar arrangements for CP employees and facilities. This way CP would back out of international routes until it returned to health, while having them provide some income, and much needed cash. If it were to return to service, AC would probably want to stay in, but would have to go back to petition for rights to fly those routes from the government.

Another solution could simply be to have one major carrier, and for competition have charters, regional carriers, and foreign competition on international routes.

One more thing. CP's rights to Amsterdam, Rome, Mexico, the South Pacific, and South America would be of interest to AC. That in addition to expanding their Asian service.
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RE: Air Canada Makes Offer To Canadian

Sat Aug 21, 1999 3:31 pm

I found this news interesting as well since, although I am a great fan of Air Canada and their great service, I also like to root for the underdog too (that being Canadian). This is not a new proposal Air Canada has issued forth. If I remember correctly, this is the third time Air Canada has proposed to buy Canadian's international roots and compete with them domestically. In the past, however, Air Canada has been more heavy with what they wanted. The last proposal Air Canada had made (in the early 90's) was to merge with Canadian altogether in hopes of collecting such profitable international Canadian routes as Tokyo and Hong Kong. Unfortunately, until Canadian can boost their revenues, the future doesn't look very hopeful.

On a tangent note, Canadian seems to be slowly moving their major hub from Toronto to Vancouver which is the second largest city in Canada... Since Toronto is the major hub for Air Canada (which is the airline many more travellers recognise) the airline will always have a solid market.

Alas proud wings!
Posts: 10104
Joined: Wed Aug 18, 1999 5:49 am

RE: Air Canada Makes Offer To Canadian

Sat Aug 21, 1999 3:39 pm

It certainly does look as if AC has CP between a rock and a hard place. There doesn't seem to be much of a choice . . .
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Joined: Thu Mar 25, 2010 10:06 pm

RE: Air Canada Makes Offer To Canadian

Sun Aug 22, 1999 12:10 am

I think Air Canada should leave Canadian alone. AC is renewing their fleet with better planes, and if they acquired CP, they would inherit crappy 737-200s and the like. While I do like Boeing (widebodies only), Airbus definitely makes better planes with utmost commonality and tremendous reliability and efficiency. Besides, the merger would link Star & Oneworld. Star is by far the better of the two (led by UA and LH, need I say more) and doesn't need to deal with "something special in the air" when the "Star" skies are already "friendly" enough.

RE: Air Canada Makes Offer To Canadian

Sun Aug 22, 1999 5:44 am

TO TRENT: although YVR is the secong busiest airport in Canada, Montreal has a population close to three times larger than Vancouver's.

The latest rumour is that a Toronto firm -ONEX- wants to buy out CP as well as AC to sell them back to AMR corp. This is studied seriously by the federal government. AC won't go without a fight though, as they might call on UAL corp and LH to invest in AC if the federal gov was to raise the limit of foreign ownership of voting shares to more than 25% as is presently the case. The fed wants to keep CP afloat to avoid upsetting voters in the west but i don't think selling the canadian flag carrier to American Airlines would be a very popular idea either.... thus i don't belive to AA thing will go through..... AMR that owns 33% of Cp's shares -25% of voting rights- has written off $246M thanks to its investmwent in CP.... and they get all the connecting traffic...

BTW i think it is unfortunate that a topic dealing with the possible bankrupcy of a Oneworld member does not draw more interst fom this forum's users..... But hey! we are not talking about BA or an American airline faith so what did i expect........So, what do you guys think about starting a new Airbus vs. Boeing thing.....
Posts: 1508
Joined: Tue Jul 06, 1999 10:52 am

RE: Air Canada Makes Offer To Canadian

Sun Aug 22, 1999 12:50 pm

It would be illegal and impossible at this point for any company to buy Air Canada. As a former crown corportation there is a legal limit of 10% than any one stakeholder can have in Air Canada. Not that the rules couldn't be changed, but it would be premature conjecture think AC would be taken over at this point. And I don't see what AMR would want with both airlines, I think the competition bureau wouldn't be pleased.

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