Says Airline Needs To Save Funds For Rainy Days
Who's running this
airline, anyway? That's a question Air Canada's pilots are asking,
as they want to have more say in how things are run. To that end...
they've filed a suit seeking to foil a plan to spend the airline's
profits.
The Toronto Star reports management at Air Canada parent company
ACE Aviation wants to pay out up to $2 billion to several Wall
Street hedge funds, investments and other shareholders who helped
finance it out of bankruptcy. That plan isn't setting well with the
Air Canada Pilots Association, who filed suit Wednesday, claiming
the airline needs that $2 billion as a hedge of its own -- to guard
against future economical downturns.
"If this payout goes through there's going to be a massive
depletion of capital from the company's core resource," said ACPA
president Andy Wilson. "Air Canada won't have the capital to
backstop a downturn in the economy and everyone knows that the
airline business is cyclical. We have to be able to withstand
headwinds."
The filing came one day before Air Canada's parent company Ace
Aviation convened a shareholders meeting to discuss the plan. Ace
paid out $300 million to shareholders last fall despite opposition
from its unions. The unions say they gave up over a billion dollars
to keep the airline afloat... and Air Canada should eliminate
pension deficits before paying off shareholders.
ACPA's suit claims if
ACE makes the planned payout, Air Canada won't have the earnings to
meet obligations for pensions, employee benefits, aircraft lease
and finance fees and other unspecified debt -- accusations Air
Canada spokesman Peter Fitzpatrick refutes.
"ACE is currently reviewing the claim and will defend its
position," Fitzpatrick wrote the Star. "The proposed plan calls for
an initial distribution to ACE shareholders of units in Aeroplan
Income Fund. ACE is able to distribute units of Aeroplan without
reducing its cash reserves, borrowing funds or incurring any
balance sheet liabilities."
"The distributions are a key part of ACE's value-enhancement
strategy which are designed to benefit not just shareholders but
also the employees of ACE companies as a whole by ensuring each
company's ability to grow and reinvest in their respective
businesses," Fitzpatrick added.
The unions say the airline isn't healthy enough to support the
loss of cash, especially if the economy tanks again. ACPA's
president told the Toronto Star the airline must be able to
withstand headwinds... and a cash reserve does just that.
"The actions of the controlling shareholder, ACE, and of the
board of directors of Air Canada are unfair and may, if not
remedied, imperil its existence," ACPA said in its court filing.
"If these transactions are allowed to proceed Air Canada would be
left with depleted earnings while carrying substantially all of the
pension obligations, most of the debt, employee obligations and
aircraft lease and finance obligations of the ACE group."
Other unions at the airline have rallied to ACPA's cause.
"If they go ahead with this, what'll be left of the company?
It'll be a skeleton," said Pamela Sachs with the Canadian Union of
Public Employees -- the union representing Air Canada's 7,000
flight attendants.
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