Air Canada independence delayed
Tuesday, March 3rd, 2009 - 9:54 am
ACE Aviation Holdings Inc. (ACE) announced today that, as it is continuing to engage with its shareholders and in light of current market conditions, it is appropriate to postpone the special shareholders meeting scheduled for April 7, 2009 at which shareholders would have been asked to approve the previously announced plan of arrangement for the liquidation and dissolution of ACE.
ACE continues to evaluate all of the alternatives available to it with a view to arriving at an optimal outcome.
ACE was set up in 2004 to bring Air Canada out of its bankruptcy with the intention that it would eventually dissolve and return the airline to its former status of a publicly-controlled, independent company. After extracting monetary concessions from employees, ACE had sold off the most profitable parts of Air Canada, including its Aeroplan loyalty program and ACTS (Air Canada Technical Services, the airline’s maintenance arm), and looked set to complete its dissolution when in December 2008 it announced a plan to distribute ACE’s remaining cash and other assets to shareholders. ACE owns 75 per cent of Air Canada and ACE shares doubled in value following the announcement.
The airline was more profitable than most over the past three years and the timing of dissolution would have preceded resolution of labour contracts due for renegotiation in 2009.
Labour relations at Air Canada (AC) are in the toilet since the economic downturn that has led the airline to lay off staff at the same time as ACE proposed distributing a further one billion dollars to shareholders, on top of previous distributions totalling $2 billion.
The IAMAW (International Association of Machinists and Aerospace Workers) says the members of the ACE and Air Canada Board of Directors will be liable for pension plan shortfalls if ACE goes ahead with its plans to wind up ACE Aviation and distribute the proceeds to its shareholders.
It remains to be seen if ACE will actually have any cash left to distribute as AC suffered a heavy 2008 loss of $1 billion (largely due to losses on foreign exchange and fuel hedges) and faces potentially fatal cash flow problems if passenger traffic continues to decline. Several analysts have already raised the possibility of another bankruptcy of AC within the next year or two.
Air Canada class B shares fell 19 cents to a record low of 79 cents Monday on the Toronto Stock Exchange. ACE class B shares declined 28 cents to $6.12. (Sources: ACE press release; Globe and Mail, 2009-02-19, “Air Canada’s problems pile up”; IAMAW)
