AC low cost carrier closer to becoming a reality

[rudder]

The Company completed tabling a comprehensive counter-proposal on Tuesday. Their counter-proposal is based on our current Collective Agreement however it includes many concessions, some of which attempt to strike at the heart of our careers and the piloting profession.

Ok, can we put the merits/distractions of TA1 to bed now please. It is not the direction that current negotiations are taking.

Trust me, you are being 'set up'. I hope that your MEC and your advisors are situationally aware. There will be no strike regardless of whether you want one or not. And the lack of a strike threat will not stop the bargaining freight train that is coming your way. You have seen this play out already in all of the airline bargaining that has transpired in the past two years.

Time to think strategically.

[yycflyguy]

The Company completed tabling a comprehensive counter-proposal on Tuesday. Their counter-proposal is based on our current Collective Agreement however it includes many concessions, some of which attempt to strike at the heart of our careers and the piloting profession.

Ok, can we put the merits/distractions of TA1 to bed now please. It is not the direction that current negotiations are taking.

Trust me, you are being 'set up'. I hope that your MEC and your advisors are situationally aware. There will be no strike regardless of whether you want one or not. And the lack of a strike threat will not stop the bargaining freight train that is coming your way. You have seen this play out already in all of the airline bargaining that has transpired in the past two years.

Time to think strategically.

I trust the MEC, NC and the IAC that we have in place this time.

All are very aware of the games that were played with the other labour groups. There are contingency plans in place. I was not surprised by the NC update we received with the company asking for concessions. I was pleasantly surprised at the fact that TA1 is not the benchmark for this round of negotiating.

We don't want a strike. We want a negotiated agreement. How we get there is half the fun.

[CanadianEh]

Prophecy:

- In the next 2-3 years we will see even more WAWCON erosion than ever before at Air Canada and in the piloting profession in general.

- AC will force employees to accept the Low Cost carrier idea or will declare bankruptcy (or both)

- Upper management will get even bigger bonuses with each passing year

- During pilot negotiations, mgmt will obliterate Scope if the pilots aren't careful and well prepared. (See Qantas)

With a conservative majority in power, this will not be a pretty couple of years for the middle class. If you want to see our fate look up "Electromotive London Ontario Plant Lockout" and see what's going on.

Let's all get our heads out of our asses before it's too late and our work conditions becomes as piss poor as the U.S.

[yycflyguy]

Prophecy:

- In the next 2-3 years we will see even more WAWCON erosion than ever before at Air Canada and in the piloting profession in general.

- AC will force employees to accept the Low Cost carrier idea or will declare bankruptcy (or both)

- Upper management will get even bigger bonuses with each passing year

- During pilot negotiations, mgmt will obliterate Scope if the pilots aren't careful and well prepared. (See Qantas)

With a conservative majority in power, this will not be a pretty couple of years for the middle class. If you want to see our fate look up "Electromotive London Ontario Plant Lockout" and see what's going on.

Let's all get our heads out of our asses before it's too late and our work conditions becomes as piss poor as the U.S.

Corporations cannot just "declare" bankruptcy. They have to go before a judge and prove their insolvency.

We have Scope protections QANTAS does not.

I agree with the unabated increases in executive bonuses.

[rudder]

Corporations cannot just "declare" bankruptcy. They have to go before a judge and prove their insolvency.

AC could go to the Commercial court today with a petition and would possibly get it ($9.8B is assets vs $12B in liabilities). Take a look at the most recent corporate CH11 filings in the US. The court has accepted 'insolvency due to a forecast liquidity crisis' before (see the Stelco file circa 2004). That is exactly what would have happened in 2009 if CR had not secured agreements to modify cash outflow and cash requirements. Ultimately it may represent just a delay of the inevitable.

[yycflyguy]

Corporations cannot just "declare" bankruptcy. They have to go before a judge and prove their insolvency.

AC could go to the Commercial court today with a petition and would possibly get it ($9.8B is assets vs $12B in liabilities). Take a look at the most recent corporate CH11 filings in the US. The court has accepted 'insolvency due to a forecast liquidity crisis' before (see the Stelco file circa 2004). That is exactly what would have happened in 2009 if CR had not secured agreements to modify cash outflow and cash requirements. Ultimately it may represent just a delay of the inevitable.

So I guess you believe everything you read in the quarterly/annual reports and don't think that creative accounting hides money?

A judge is going to have a hard time believing that on $10.8 Billion on operating revenue and a gain of over $400 million on operating income that AC is insolvent. They also have over $740 million cash on hand.

Comparing AC to the recent AMR CH11 filing is unrealistic. They have a fleet of inefficient aging MD80s that must be replaced with their recent announcement of A320 NEOs. They had their chance on government assistance after 9/11. Every other airline took it.

[rudder]

Comparing AC to the recent AMR CH11 filing is unrealistic.

Are you sure? AMR is significantly larger in revenue and went in with way more cash than AC will ever generate ergo the lack of need for a DIP lender. FWIW - I believe that the AMR filing is an abuse of process. Not because they aren't technically insolvent - they are - but because they only went in specifically to gut the labour agreements and terminate employee pensions. The PBGC has an opinion on the latter agenda.

I do not wish CCAA on anybody. But the market certainly has priced it in as a likely outcome for AC.

Once again, this is all about situational awareness and preparedness that spans outside of the bargaining table environment.

[TheStig]

Not to sound like I've got my head deep in the sand, but Air Canada's current position isn't that bad…things are always going to seem doom and gloom while negotiations are on going. Interestingly, this past week has highlighted the difference in New Age vs. Old School airline management/employee relations. With WestJet hosting town hall meeting to gather its pilots feedback, while Air Canada's negotiators tabled a low-ball offers at ACPAs negotiators as would be expected with classic negotiating tactics.

For those reading this forum who don't know how we got here today, up until a year ago ACPA's membership was led to believe we were working towards a more 'WestJet style' relationship with Air Canada's management, with open communication lines and what was supposed to be a mutually beneficial relationship.

A voting block within ACPA's Executive Counsel led its membership down the garden path hand-in-hand with management resulting in numerous contractual concessions the membership didn't vote for (such as SkyRegional), a pension moratorium, and a number of other smaller items. All while the membership was assured (by ACPA) that the Pilot's would be rewarded during negotiations, when TA1 was revealed, it became apparent there was no reciprocity.

The failed deal has been discussed extensively on this forum, notably the LCC. Since TA1 was voted down, ACPA has replaced the members of its Executive Counsel they felt betrayed them, assembled a new negotiating committee, and are now back at the table. Of interest none of the other unions made concessions, through mediation have created a better pension plan than TA1 contained for New Hires, and didn't take reduced wages for any LCC (the other unions don't have any scope, but that's another story).

Going back to the start of this short essay, you can't help but wonder how different the last year may have turned out if Air Canada's negotiators hadn't so quickly come down with amnesia (and reverted to old school negotiating tactics) when they sat down with ACPA's original negotiators. Would CUPE have made concessions for LCC flying? Would the CAW have been so successful in obtaining a 'hybrid' pension for its New Hires? Would AC shares be on the verge of becoming penny stocks? Maybe they shouldn't have turned their backs on their 'partners' when they sat down at the table, it certainly seems like the pilot group today is united and focused on achieving a balanced agreement.

[Ifly]

"Isn't all that bad" ??

Maybe today....What about 2014?

The pension holiday ends and AC owes 2.something BILLION to the pension.

Where does that money come from? AC leases everything they have, there is nothing left to sell. They have had a loss for every quarter since what...1937?

I sense a giant other shoe dropping.

[TheStig]

"Isn't all that bad" ??

Maybe today....What about 2014?

The pension holiday ends and AC owes 2.something BILLION to the pension.

Where does that money come from? AC leases everything they have, there is nothing left to sell. They have had a loss for every quarter since what...1937?

I sense a giant other shoe dropping.

iFly no argument there,

Like most I'm poorly versed in the details of the pension plan but it seems like there are two options. 1) Try and fix it now. 2) Wait until 2014 and see what happens. In some ways, the pension has become mutually detrimental. Air Canada's growth and profitability will be stunted by its obligations to fund the plan.

While for the pilots it is a burden until the day they retire (both in their ability to fund RRSP's and at the negotiating table). Even if interest rates recover it is still in AC's interests to keep it underfunded. Senior pilots have proven their willingness to give up almost anything to keep their pension (can you blame them?). Thus, junior members are tied to increasingly poor WACONs, while facing the prospect of remaining junior indefinately. Without turning this into an Age 60 thread, every action has an equal and opposite reaction and 900+ ACPA members have (comparatively) very little invested in the pension plan.

Airbus received 1300+ orders for the A320 last year alone, and currently every Air Canada pilot could hold a position which would see them type rated on the A320 in less than 6 months. With no pension plan, it isn't unimaginable that pilots would use Air Canada as a stepping stone in the coming years, and actually force Air Canada to actually improve wages and working conditions at the bottom end of the pyramid. I'm not proposing Air Canada pilots should give up on their pension plan, but exchanging (say the top-hat) for real wage gains isn't a terrifying prospect for a large portion of the members either.

[Tiny Tyke]

Prediction: Bankruptcy in late 2013 or early 2014.

[Fanblade]

The new distressed pension plan work out scheme legislation will enable companies to rid themselves of pension burden they can not afford without resorting to CCAA.

the devil is in the details.

The question for RPP members at AC is do you deal with it now? Trying to keep control? Or do you wait and risk an imposed reduction from an outside body.

Clearly the AC unions are choosing the latter.

In 2014, when the pension moratorium ends, we will likely see AC apply for the distressed pension workout scheme, and have their pension liabilities taken care of by an outside body while unions are locked into contracts.

You don't see companies heading for CCAA that repurchase their own stock. The do it when they think it is under valued.

https://secure.globeadvisor.com/servlet ... CKERAATL_1

Ask yourself where AC stock would go if the pension problem was fixed over night?