YYZC2

B767: Thanks. Among AC employees, there seems to be some confusion as to the status of existing collective bargaining agreements in the event of a filing. Some say they stay in place, some say they are voided, and others say they go up for automatic renegotiation. Others tell me a magistrate of some sort can unilaterally impose wage cuts and/or work rules. The CCAA as it pertains to these specifics is of great interest to me.

Shareholder

On this one, I agree with Ferrari and KH. It is political and the government would not let AC disappear. Also, even in bankruptcy protection, AC needs to keep its customers and dumping its Aeroplan liability would be a death knell. Who would fly AC if they had just vapourized your nest egg? Remember, MPs have Aeroplan accounts too, and almost as many miles in them as in Ferrari's...

jakob

not saying Aeroplan will be gone (don't think so anyways too much at stake) if AC goes into bankruptcy protection but i have recently cashed all my Aeroplan miles for a return ticket to Asia. it's bye bye to AC unless i travel domestic even then i'd consider WestJet first since i'd have no more Aeroplan miles!

B767

I am not saying the govt will let AC simply disappear. However don't expect it to be business as usual. Unless the government steps in and loans (or offers guarantees) AC billions, not millions than AC has to deal with it's creditors no different than any other company. If the govt does step in look for the medicine to be strong. While they would face criticism for saving AC they would also face criticism for bailing out AC, especially from the West (I can hear Clive already asking for the same deal) unless AC has a solid turnaround plan and there is a change in management. Just look at this managements 5-7 year record, it's not pretty.

If the creditors end up with AC look for them to be tough, after all they have loaned AC billions (of our RRSP money etc) and will need to recoup as much of the money as they can. Look for The Caisse has to be tough, they suffered a huge loss last year and need to turn around the funds performance and can't act like AC's limitless bank as they have in the past. I doubt very much the creditors will want to run the airline and I am guessing they would want to try and clean it up as best as they can and sell it ASAP. The balance sheet would have to cleaned up a lot, plane and airport leases renegotiated, long term cost effective labour contracts in place and most of all the price will have very, very attractive. Remember in order to be a seller you need to have buyer.

CCAA is normally a very quick process unlike C11 in the USA, which can last for years. The receiver (you didn't think AC gets to continue to run the show did you?) who takes control has I believe, 30-60 days to present a "turn around" plan to the bankruptcy judge. They can ask for an extension and if they are close to agreement it is usually granted. If after that they haven't reached an agreement it moves on to liquidation.

I am not sure if the bankruptcy judge has the powers in Canada to void union contracts or not. I would have thought your union would have addressed this issue to its members.

I fully understand the both the purpose and benefits of a strong FF program to AC, that along with the fact AP is profitable when the airline itself is losing money. I have been critical of the current management team (believe it or not I used to be a huge supporter of RM) for it's cuts to the program and its plan to turn it into a frequent buyer program. I just see a huge liability on their balance sheet and if I was one of the creditors getting pennies on the dollar I would be looking to share the load. If they are looking to clean it up and get out ASAP they really don't care about the long term effects. One thing the new owners might do is to cap the number of AP miles we can "carry forward" to the new company.

airbus320

From the G&M:

"Analysts polled by The Globe and Mail yesterday estimated that there is a 30- to 65-per-cent chance that Air Canada will file for protection under the Companies' Creditors Arrangement Act.

Five analysts were asked to quantify the likelihood -- and timing -- of a potential bankruptcyfiling. The analysts participated on the condition they not be identified.

The most optimistic analyst estimated a 30-per-cent chance of a CCAA filing, while the most pessimistic put the odds at 65 per cent. Three others put the odds at 33 per cent, 45 per cent and 60 per cent, for an average of 46.6 per cent.

"Over the past couple of weeks, I think the situation has deteriorated even more. So if it was 52 per cent, I think it's 60 per cent now," one analyst said."

LondonElite

I wouldn't put too much faith in analysts these days! They have a tendency of missing the forest for the trees.

B767

YYZC2, excerpt from today's G&M;

Quote:

<font face="Verdana, Arial, Helvetica, sans-serif" size="2"> Air Canada has been working with its unions to cut $650-million from its $3-billion annual labour bill. Some unions have said they are willing to work with the company to cut costs, while others have indicated that they have little intention of giving concessions.

"I think a lot is going to depend on what kind of concessions they can wring out of their unions. Assuming that they don't get any concessions, I think there's a very likely chance that they will have to file for bankruptcy." one analyst said.

Some analysts said the company's unions have little incentive to help out the company.

While US courts have the authority to rewrite labour contracts, it's not clear that Canadian judges have the same powers. As a result some analysts suggested unions could have more to gain for a CCAA filing. That's because other stakeholders would share the pain

But one bankruptcy lawyer said that while it has never been tried in Canada, the airline might be able to convince a judge to throw out its labour contracts under the procedures of getting "executory contracts".</font>

YYZC2

B767: I read that earlier today. Given the lack of precedent, I wonder what would convince a judge to take the unusual step of voiding the contracts?

Apparently AC told the CAW today they wanted 1500 jobs cut immediately, and the CAW told AC that was unacceptable. These guys kill me. I guess the only thing they need to agree on now before their next meeting is who will bring the fiddle and who will bring the matches.