AC.B stock

[CanadaEH]

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

Doesn't have to be a recession. Look back over the past seven years: SARS, Iraq War, 9/11..... all it takes is one event and guess what? The industry goes to hell for a few years.

[2low]

FI

[Brick Head]

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 consistent basis.

Using the example of the 3 stages above.

ACE exists from the beginning of stage 1 to the end of stage 2. Their primary purpose is monetization and distribution of the created wealth to shareholders.

Air Canada as a separate entity with its own BOD begins in stage 2 continuing on through stage 3. Their purpose is to create a viable and sustainable airline. Plan for the future and so forth.

During stage 2, our present stage, the two companies overlap. There is not just an apparent, but real dichotomy, as ACE and Air Canada have different corporate agendas. Air Canada - a traditional corporate agenda. ACE - an agenda you would expect from a vulture fund.

Just because you see one hand planning for the future does not mean the other is looking any further than the exit door.

[CanadaEH]

You said earlier:

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.

And then you say:

Air Canada as a separate entity with its own BOD begins in stage 2 continuing on through stage 3. Their purpose is to create a viable and sustainable airline. Plan for the future and so forth.

Which is it? I've said that a company needs to be consistantly profitable to be sustainable long-term. You seem to contradict yourself unless I misunderstood you somewhere along the way..

ACE will eventually cease to exist but there'll be potentially four separate entities created by ACE in Air Canada, Aeroplan, Jazz, and ACTS. Unless you're saying that ACE's goal isn't to be profitable but the subsidiaries are... you've lost me!!

[Brick Head]

You said earlier:

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

And then you say:

Air Canada as a separate entity with its own BOD begins in stage 2 continuing on through stage 3. Their purpose is to create a viable and sustainable airline. Plan for the future and so forth.

Which is it? I've said that a company needs to be consistently profitable to be sustainable long-term. You seem to contradict yourself unless I misunderstood you somewhere along the way.

CanadaEH,

If you really want to get some understanding of how Vulture funds work, particularly when they control a company, do a google search. vulture fund, hedge fund, Cerberus.

You are viewing Air Canada from a very traditional sense ( A companies objective is to make money and be sustainable ) And although you are correct, it is the only way to sustainability it is not the only way a company can be viewed. Not all companies are interested in sustainability. Vulture funds, when they control a company, act in ways that are not consistent with what we view as traditional. Remember Air Canada although it has its own BOD is still controlled by ACE for the time being. Two corporate agendas taking place in unison. AC is looking to the future. ACE is looking to remove the value they created as expeditiously as possible.

ACE will eventually cease to exist but there'll be potentially four separate entities created by ACE in Air Canada, Aeroplan, Jazz, and ACTS. Unless you're saying that ACE's goal isn't to be profitable but the subsidiaries
are... you've lost me!!

I wouldn't go so far as to say ACE doesn't want to be profitable. I am sure they would take that too. Their main objective though is to extract value and hand it over to the shareholders. They are doing it through IPO's, distributions, income trusts or what ever works. The original investors have already made more in return than their original investment while still owning their shares. With that kind of return on investment why go traditional? Why not just move on to the next prey?

So no, ACE's primary purpose isn't profit nor does it matter because they have no desire for sustainability.

Of course I am portraying a negative slant on Vulture funds. Heck the name does it itself.

To be fair, Cerberus would likely respond with something like this.

Cerberus is sort of a corporate fix it shop. We take what is broken, worthless, about to be thrown away and fix it. For that we are entitled to the value of the new entity since it had no value prior to our involvement. In their defense they have a very solid track record of getting corporations back on track. Of course in exchange for that they take everything of value before leaving.

My point to you has been, and still is. It is too early to access sustainability or profitability. Any inference to the contrary only demonstrates that there is not a complete understanding of what is going on.

To take a quote from the previous page.

It's a well-planned strategy that's only halfway to fruition.

[Dockjock]

Brick Head your assessment is bang on.

To borrow a Conrad Black-ism, vulture funds are not proprietors. In stark contrast to Air Canada, I'd say that Westjet is run by a board/shareholders that have a proprietor's mindset. Air Canada is run by a board/shareholders that have a vulture's mindset.

Unfortunately I see myself already falling into the mental mindset that I said I'd never fall into- when working for a vulture your mindset must become "eat or be eaten". Try as I might, sometimes I just can't see another way....which is somewhat depressing but I suppose I'm not in Kansas anymore.

[Four1oh]

http://www.investopedia.com/terms/h/hedgefund.asp

Brickhead, you say 'We' when you talk about Cerebus. Are you a Cerebus employee?

[Brick Head]

Brickhead, you say 'We' when you talk about Cerberus. Are you a Cerberus employee?

Heck no. AC. It was a feeble attempt at writing first person.......wait a minute is that third person? Second? Eighth? Good thing I don't write for a living.

My opinions may sound a little more skewed toward Cerberus but I think or at least hope it is just balanced. My brother in law works in investment banking and thinks Cerberus is the greatest thing since sliced bread. He thinks Milton's plan for the restructuring of Air Canada is sheer genius. Thinks the best thing for old bureaucratic companies and the economy, is a good house cleaning at the hands of a company like Cerberus. Thinks unions are a menace. He thinks I owe my future, my job, and my pension to Milton's restructuring plan. He'll probably tell me to send him a thank you note if this all works out.

Ok so you get the idea of where he is coming from.

He assures me that Cerberus is not just in this for strip mining. They too want an outcome that sees Air Canada thrive. Hedge funds used to just chop up companies and liquidate them, but today they have evolved into sort of corporate fix it shops. The reason is two fold.

One -they figured out they can make more money by monetizing but only to the point that a viable company is left over at the end to sell or continue to control.

Two- politically there has been a lot of pressure to reign in vulture funds. At the moment they operate pretty much outside of securities laws. They make a lot of money off of situations where people are loosing jobs, savings, investments, pensions, ect. They argue in defense of their actions that what they do is good and necessary for the economy and employees in the end. Plus the risk they take is deserving of good returns.

And as you know we are not just talking good returns either. Huge is closer.

So too many failures and the politicians will swoop in and start to regulate. Too many failures and they won't be asked to the next party as these takeovers are usually accomplished as consortium's and reputations for success are paramount. Too many failures and institutional investors will stop following them into investments.

I am not suggesting we are as good as gold. Just that we will have to wait and see because the jury will be out for a while yet.

There is one thing my brother law does stress and that is that Air Canada's cost are still to high. If things were to stay the way they are right now Air Canada would not be viable in the long run with or without the equity that is being removed. Another shoe has to drop, and you know it will. Why? Because this is Cerberus we are talking about. This is why the unions are so uneasy.

Force employees to compete for work that used to be theirs. It won't be pretty to watch. It has already started. The below the wing handling in LHR. AC threatened to contract out unless the union agreed to wage cuts. The union capitulated to the demands and kept the jobs. ACTS demanded further wage cuts or AC would use foreign maintenance. The union didn't capitulate and 680 got let go in YVR.

[Hadji Ramjet]

Cerberus isn't a vulture fund; different philosophy.

[Flightlevels]

AC.B taking another kicking today. I would hate to be the guy that bought in on that IPO of 21.00 and now sitting at 13 and low change. Anyone from internal management giving any feedback to you guys on the price? I know when WJ was down last year, management commented to the employees several times on the price. What gives as of late? You are hedged to some degree and the dollar is huge.

[Brick Head]

AC.B taking another kicking today. I would hate to be the guy that bought in on that IPO of 21.00 and now sitting at 13 and low change. Anyone from internal management giving any feedback to you guys on the price? I know when WJ was down last year, management commented to the employees several times on the price. What gives as of late? You are hedged to some degree and the dollar is huge.

Reading the thread should have given you the answer. But here goes with a little more detail.

AC is being Gutted. Investors are starting to get wise to the financial relationship set up by ACE with its subsidiaries. This is causing uncertainty.

Air Canada is paying the equivalent of (27.4 CA ref. Jazz Q1 results) 23.03 cents US per ASM for Jazzes services. The average in North America, for a connector, is 14.05 US cents per ASM.

The difference, 9 US cents a seat mile times the 5.5 billion ASM Jazz operates on behalf of AC = 495 million US above the industry average, that AC paid for the 12 months ending March 07.

But Jazz only showed a 35 million profit for the Q1. Extrapolated over a year 140 million CA. Where did the rest go? Jazzes "consolidated" CASM is listed at 24.7 cents Canadian (20.69c US) in their Q1 results. The average CASM for a feeder is 12.56 cents US per seat mile. The difference just happens to be almost the same as the amount AC is paying over the North American average.

What a coincidence.

So why is Jazz's "consolidated" CASM so high. So high in fact that it is 8.5 cents US above AC itself. The answer is it isn't. All Jazz has provided to investors in "consolidated" costs (no breakdown) and by law that is all they have to provide. There is no way Jazz's cost are that high. They too must be paying for something way above the norm set up prior to their IPO.

Can you say Vulture fund???????

I had to explain that to get back to your question about Air Canada. Air Canada is paying almost 1/2 a billion over the North American average for connector feed and is locked in until at least dec. 2009 at those rates. Maybe as long as 2015 as the CPA is very Vague in places. I am told the situation between Air Canada and Aeroplan is similar, however I have never looked at the numbers personally.

As an investor you have to be really concerned about AC in a downturn under these conditions.

As an investor you have to be very concerned about Jazz under these conditions and not just because they rely on AC' longevity. It is obvious the amount Jazz is receiving from AC will eventually fall in line with industry standard. But when and with no idea of what their CASM actually is you can not determine profitability at all. Notice their share price has been falling too.

To make the situation worse Air Canada is also only publishing a "Consolidated" CASM themselves. In other words the 14.43 cents US per seat mile includes the 23.03 cents a seat mile they are paying Jazz for 5.5 billion of the seat miles.

So what is Air Canada's and Jazz's real CASM. No one knows except to say less than what has been published.

So the share price drops as the sucking continues. Then once the sucking stops Jazz and Air Canada's numbers will appear miraculously fixed and up will go the share price again.

At which point, after sucking all they can, the vulture funds will sell high, exit and ACE will close up shop.

So how much of this do you think they want to tell the employees considering the wage and working condition cuts we all took?

[tonysoprano]

I think I would have preffered Mr. Li. To think we threw him out over the pension choice.