AC.B stock

[Squid]

Well, I have to say I sure am not impressed with the stock performance at the ol' AC. I think the IPO came out at 21 dollars and we are sitting at 14 and change. I think quite a few people have taken a bath on that one. WJ is still around 16 and analysts are all favouring that one and downgrading us. They site labor and taking on more debt. The companys valuation is going down the crapper along with the moral. Finally picked up my "walk the line in 09" sticker and threw it on the ol' flight bag. Nice.

[snapped]

Why would you invest in a company that already went bankrupt. Once a dog its always a dog.

[Inverted2]

And they're still losing money now with an 84% load factor!! They will go bankrupt again, its just a matter of when. Its a cyclical thing.

[Dockjock]

This being an owner crap hasn't been all that great so far.

[KAG]

This being an owner crap hasn't been all that great so far.

unless you work for the teal team...Sorry couldnt resist.

ACE is making money, it's hidden in it's many arms (IE Jazz, aeroplane, ground services, ETC). I still think AC this year will turn a nice profit over the full year. It's creative accounting by the bean counters to soffen up the unions for the upcomming slug fest that 09 will turn into...

[Dockjock]

Precisely.

[CanadaEH]

ACE is making money, it's hidden in it's many arms (IE Jazz, aeroplane, ground services, ETC). I still think AC this year will turn a nice profit over the full year. It's creative accounting by the bean counters to soffen up the unions for the upcomming slug fest that 09 will turn into...

ACE actually isn't making money; it posted a loss for Q1. The companies that are making money were the first two to be "spunoff": Aeroplan and Jazz. Aeroplan is making a lot of money and Jazz - with its CPA - is guaranteed to make money. AC actually lost $101M in Q1, but with some fancy one-time gains it looked a lot less at a $30-whatever million loss.

If you all want AC to be sustainable you want it to post a profit every quarter of the year. Think all you want about "softening up the unions" but thats bullshit. If thinking that puts your mind at east, have at 'er. The only way you're gonna see a raise in pay is if AC can make money four quarters out of the year. When you're only making money in two or maybe three, one glitch in the world and you'll be right back at square one losing millions of dollars a day.

[Brick Head]

CanadaEH,

Although what you have to say has a lot of merit, particularly with regard to softening up the employees, your comments reveal that you don't really understand what is goping on with the ACE group of companies.

First and foremost the present structure is not about making money. It is about sucking as much out of the companies as possible before setting them free. Remember the "profitable" units are income trusts. They don't keep any of the profit. It all gets disbursed to the share holders.

I am going to explain what is happening in very simplistic terms.

It turns out that Air Canada's strategy for CCAA recovery was a three stage plan. The unwashed such as ourselves just thought it was about recovery and creating a sustainable airline going forward. We are so ignorant

Stage one: recovery from CCAA

Stage two: Our present stage. Reward the investors who brought us out
CCAA. Break up the companies to creates value. The sum
being greater than the whole. Then monetize the companies
giving as much as possible to the original investors in a
tax friendly manor. The strategy has seen 2.3 billion in
distributions as of May 24, 2 income trusts with service
agreement contracts way above market value and 4 IPO's.
ACTS will be next.

Stage 3: Once ACE has sucked as much as possible out of the their
holding companies they close up shop. They cease to be,
leaving behind 5 totally separate companies, with no equity,
to fend on there own. Expected in late 2008.

It will not be until stage three that we will really get any feel for just how sustainable these companies actually are. Even then it will only be over time that we get a feel for Air Canada's sustainability as the very expensive contracts they have been saddled with, by ACE, come up for renewal.

Did you know Air Canada no longer employs Ground handlers and ticket agents. They are a separate company called Air Canada Ground handling services ACGHS. Their contract expires in 2009.

Air Canada is now as we speak free to use any maintenance it wants. 680 ACTS employees just let go ( as we speak) in YVR as heavy maintenance is being done 3rd party over seas.

Jazz's CPA. In comparison to south of the boarder Air Canada is paying a 50-70% premium for this CPA. That contract has mandatory renewals until 2015 at which point Air Canada can use anyone they want for a CPA.

Aeroplan. Sorry can't remember when that contract expires nor how much above market value it is.

ACPA has hired professionals to follow what ACE is doing and give the union a better understanding of what is happening and where it is going. The jist of it is this.

-ACE's time line for sucking the cupboards dry equals contract renewal time. Equals hard to come by pay raises because arbitrators will look at Air Canada's ability to pay. They won't care how it happened.

-Air Canada is profitable but will be left with virtually no equity by the time ACE finishes. Equals dropping share price and the true beginning of recovery commences after ACE exits.

-The other companies around Air Canada with expensive contracts have a rude awakening come contract renewal time with Air Canada. ACGHS, Aeroplan, Jazz.

-All the financials you see right now are about one thing and one thing only. Getting as much cash as possible into the hands of the original investors.

It has nothing to do with sustainability.........Yet.

[tonysoprano]

Gee. It's taking a long time to respond. Must be consulting with Clive on this one.

[Dark Helmet]

I kinda taking a shot in the dark here.

So Air Canada spun off its own Maintenance division, as well as a Ground handlers and agents. So after 2008 who will actually work for Air Canada? Just pilots and FA's?
What is stoping them from breaking thoses groups off further, and handing their flying and inflight services to other 3rd party groups.

I am sure the scope clause in the ACPA contract will prevent that from happening, but don't the Ground Handlers and Mechanics have similar clauses within their contracts?

Heck will there even be any Air Canada employees down the road, or will all the work be contracted out to the lowest bidder.

[CanadaEH]

You explained it pretty well. I understand most of what's happening, but I don't necessarily agree with it... and I'm not even an AC employee.

It will not be until stage three that we will really get any feel for just how sustainable these companies actually are. Even then it will only be over time that we get a feel for Air Canada's sustainability as the very expensive contracts they have been saddled with, by ACE, come up for renewal.

How long is "over time"? ACE exited CCAA a few years ago. They exited with a plan for Air Canada and Jazz which has seen mainline CRJ's go to Jazz, the addition of EMB's to mainline, a reduction of Airbus, and a widebody fleet renewal that's already bringing 777's into the fleet. I understand that things don't happen overnight but this year is the year we see how sustainable AC will be, IMO. We're nearing the top of a cycle that's producing healthy loads for both carriers, industry leading margins and profits for one (WJ), and a stable, competitive evironment for both. I don't follow AC's quarter results or analyst results for AC but they said two things following Q1: debt is rising and so are costs.

Did you know Air Canada no longer employs Ground handlers and ticket agents. They are a separate company called Air Canada Ground handling services ACGHS. Their contract expires in 2009.

ACGHS is part of Air Canada as is AC Vacations and ACM, no?

[Sage]

ACGHS is part of Air Canada as is AC Vacations and ACM, no?

Nope...ACE is the parent company. Air Canada is part of ACE as is Jazz, Aeroplan, AC Vacations, etc. All totally separate companies under the ACE umbrella.

[Flightlevels]

doesn't really seem to be a great deal for the long term prospects of an employee. Maybe I'm wrong.

[CanadaEH]

ACE's principal interests are:
Air Canada 75.0%
Aeroplan 40.1%
Jazz 58.8%
ACTS 100%

I have read quite a few times that Air Canada controls AC Vacations, ACGHS, and ACM. I cannot verify that, however.

[CanadaEH]

Found this on AC's website:

OTHER SERVICES

Air Canada's specialty charter service, Air Canada Jetz, provides air travel and personalized service to professional sports teams, corporate incentive travellers and executive groups, offering a premium business service featuring all-business class seating comfort. Air Canada Vacations (http://www.aircanadavacations.com) is the fourth largest Canadian tour operator. It offers a wide selection of sun and cruise leisure packages and excursions, with air transportation supplied by Air Canada and its Star Alliance partners. Packages to more than 90 destinations in the Caribbean, Central & South America, Europe, Asia and the U.S.A. include roundtrip airfare, accommodation and airport-hotel transfers/car rentals. Over 270,000 Canadians traveled with Air Canada Vacations in 2006. Air Canada Cargo (http://www.aircanadacargo.com) provides direct cargo service to more than 150 destinations worldwide. In addition to a freighter network extending to Asia and Europe, customers have a choice of various airport-to-airport services for everything from fresh flowers and fine art to seafood and seasonal produce.

I forgot about AC Cargo and AC Jetz. Can't find anything about ACM (am I even thinking of the right thing? Air Canada Maintenance?) or ACGHS.

[Four1oh]

I think Brickhead has hit the nail on the head. It's a well-planned strategy that's only halfway to fruition.

[Airband]

ACE's principal interests are:
Air Canada 75.0%
Aeroplan 40.1%
Jazz 58.8%
ACTS 100%

I have read quite a few times that Air Canada controls AC Vacations, ACGHS, and ACM. I cannot verify that, however.

New ratios after the May distributions to ACE shareholders are:
Aeroplan - 31.1%
Jazz - 49.0%

[Brick Head]

CanadaEH,

You still have your head wrapped around the purpose of a company as being to sustainably make money, reinvest in the future and so forth. We were brought out of CCAA by a vulture fund. VULTURE. When they have finished picking the carcass clean they will move on. They would argue that they created value/equity out of nothing as AC was bankrupt. They as owners are entitled to that equity. They as owners have every right to maximize that equity to the best of their ability. The fact that they want it ....all.....now.....in their pocket.......is what vulture funds do. They would also add without them we wouldn't have jobs


"ACGHS is part of Air Canada as is AC Vacations and ACM, no?"

ACGHS is now a subsidiary of Air Canada. Last August the corporate structure changed and it became a separate company with a service agreement for ground handling with Air Canada. The employees of ACGHS comprise of Baggage smashers, gate agents, ground maintenance and STOC employees.

Air Canada cargo is a subsidiary of Air Canada.

AC Vacations is part of Air Canada as is AC Jets.

ACM? I assume you are referring to maintenance. The new name is ACTS. Air Canada Technical Services. They are a subsidiary of ACE not Air Canada. They are trying to re invent themselves as a heavy maintenance company on the world market. They are being shopped around as we speak. ACE is looking for a buyer rather than an IPO in this case. High labour costs have been sighted for the limited interest, although with the recent purchase of the maintenance company, by ACTS in South America, that will likely change.

Flightlevels,

"doesn't really seem to be a great deal for the long term prospects of an employee. Maybe I'm wrong."


Actually no. Short term there are definite risks. Another SARS, War or something like that at the wrong time could spell CCAA once again.

Long term yes. Because of the way Air Canada has been structured costs will continue to drop for the next decade. Clive said it himself. Air Canada's costs, even after CCAA, are still way to high. He is right. Air Canada would have made 408 million in 2006 had this change in structure not taken place. ( According to ACPA's hired professionals) This sounds good at first glance but not really. It is less than a 4% return. Wait for the next crisis, downturn or Low Cost carriers, such as yourself , going global.

Pilots -an initial est. 25% pay cut. No increase in 2004/05. Below cost of living increases in 06/07/08. More of the same likely from arbitrators post 2009. After inflation pay cut by 2015 ish 30%.

FA's - no real pay cut taken during CCAA. But they allowed a B scale that pays 7-11 eleven wages. This group already represents over 20% and growing.

Ground handling - Air Canada will be free in the future to hire whom ever they want. Although ACGHS may yet survive. They also brought in a 7-11 B scale/ no benefits that is growing. We will have to wait and see if ACGHS can compete with the likes of Globe ground for Air Canada's business in the future.

Loyalty program- Again Air Canada will be free to negotiate terms in the future for it's loyalty program or go else where.

Connector feed - Again Air Canada will be free to use anyone they want come 2015.

The best protection for our future and pension is a competitive, viable and sustainable Air Canada. That will not happen without further cost cutting. The only way Air Canada can be truly competitive going forward is if they get their costs in line with other airlines when it comes to wages, ground handling, maintenance, connection, loyalty programs and so forth. This will slowly happen as the new corperate structure forces employee groups to compete for work that used to be their's. The employee groups that do not have to compete for work have already given the most. The pilots the biggest pay cuts, and the FA's a future of 7-11 wages.

The strategy is all starting to make sense now.

Of course we all would have preferred the plan did not include the gutting of equity by vulture funds. That goes without saying.

[ACinterviewee]

Hello Brick Head & all AC folks,

Thank you for all the interesting details. I have an interview coming up shortly and was wondering what the prospects look like for a new hire. How risky will this move be if you already have a decent job and are looking at a possible upgrade in the near future with a good employer . Sorry I can't be any more specific as I don't want to jeopardize anything with my current employer. I am trying to look at the big picture down the road and any insight from anyone would be greatly appreciated. Thanks!

[tonysoprano]

I have said before that the Vultures need to go. And they will. When they have accomplished their mission. Will they be the only winners? Maybe. But I think at the end of the day AC will evolve into a leaner more effective machine without the troubles that come with the other labour groups. We have to in order for the Vultures to sell us, which is their ultimate goal. They also have to make us a worth while investment for the future owners. That, they will no doubt achieve. Also consider that as a smaller group AC may be an easier company to purchase. I see the day when AC will be owned by a group that the employees can work with. Hey maybe Clive will buy us. No? Who knows? Anyway, isn't it funny to see where the pessimism comes from? Yep, the writing's on the wall!!! Long term prospects? Tell ya what Flightlevels, as far as my future prospects go, I'll take it all in stride and when my job is gone, I'll personally congradulate you on your incredible predictions. Untill then, I'll take my own advice as an AC employee and continue to enjoy what is (obviously arguably) still the best airline job in the great white north. Prove it? Sorry, Ya gotta be here to know it. Perhaps try to have a scroll down the AC section of this forum. Seems like many want to work here. Geeze I don't know. Maybe it doesn't mean much. Or maybe they don't agree with your opinion.

[CanadaEH]

Nobody was arguing that AC was a bad place to work up until your post.

[tonysoprano]

Nobody was arguing that AC was a bad place to work up until your post.

You're right and that's not the way I took it. I was only responding to the comment about our future prospects at AC from your coleague. You know, the usual WJ negative opinion on the future of AC which requires the usual response from me. Same old song and dance. Did you bother reading the rest of the thread? You have your opinions, I have mine. FI.

[CanadaEH]

You still have your head wrapped around the purpose of a company as being to sustainably make money, reinvest in the future and so forth.

Well what's the purpose of a company then? AC is already investing in the future by purchasing 777's and 787's. The only part they haven't done (yet) is make money on a consistant basis. You go on to say that the vulture funds are going to "pick the carcass clean" and then move on. When they move on, I'd assume they'll do so when they've maximized their return. Where does that leave Air Canada (I'm not worried so much about Aeroplan or Jazz)? When your profit margins are in the negative for one or two quarters of the year and only slightly in the positive for the remainder, where do you plan on making money when the industry (globally or nationally) goes down the shitter?

[tonysoprano]

When your profit margins are in the negative for one or two quarters of the year and only slightly in the positive for the remainder, where do you plan on making money when the industry (globally or nationally) goes down the shitter?

Good point. Hey does anyone know how many recessions we've had in the past 70 years? Just wondering.

[Flightlevels]

I think if it does come Tony, as always the guys with the seniority will do ok...it's the downsizing that will hurt the juniors. Your lucky with your seniority number (97or 98 was it)where you sit I doubt you will feel any effect barring a strike from any one of the ACE arms. I for one hope it doesn't happen. You guys have enough on your plate right now. Cheers.