May. 30, 2003. 07:01 AM
Ailing Air Canada fights to survive
Deal with pilots would increase airline chances
‘The labour concessions are the really big test’
SUSAN PIGG
BUSINESS REPORTER
Air Canada remains in a critical fight for survival that it could lose even if the lone holdouts — its unionized pilots — agree to job cuts and millions in concessions, it was revealed in bankruptcy court yesterday.
The board of the cash-strapped national carrier was scheduled to hold an emergency teleconference last night to consider “whether it carries on with business” — the most drastic of a number of options open to the board, said court-appointed bankruptcy monitor Murray McDonald.
“They’ve got tough decisions to make,” he told reporters after a stunning morning of developments for the battered airline, which continues to lose about $5 million a day and doesn’t have enough cash on hand to cover $238 million of the $730 million in financial obligations it has amassed since filing for protection from its creditors April 1.
Speculation was rampant the board could decide to resign en masse if a deal is not reached by this morning with the pilots.
Air Canada pilots were working on proposals late last night and were hopeful they would have a deal with the company in time, according to Captain Don Johnson, president of the Air Canada Pilots Association. But what happens next should become clearer at a court hearing scheduled for 2:30 p.m. today.
“The likelihood of emerging from this crisis is increased manifold if we are to (finalize) deals with all the labour groups by the weekend, because then we know we can get costs down quickly,” said a source close to the negotiations.
“The labour concessions are the really big test.
“If we can get over this hurdle quickly then we’ve got a really good chance (to win over other stakeholders and creditors).
“We’re prepared for a disastrous year from a revenue viewpoint.
“But we think we can survive, and are well positioned for when things improve, if we can just get costs down quickly,” the source said.
The hours up to today’s hearing are “very critical,” said Air Canada lawyer Sean Dunphy yesterday after telling the court, “when you think things can’t get worse, they do.”
He described his client as “double insolvent,” meaning that despite the fact Air Canada has court protection from creditors and hasn’t had to pay millions in aircraft leases for almost two months, its operating costs still exceed the $492 million in cash it had on hand Monday.
The airline could be down to just $188 million by Aug. 22, “well below the minimum cash the company advises it requires to operate,” McDonald said in a 17-page report.
The report paints a grim financial picture.
Air Canada is refusing to draw on debtor-in-possession financing from General Electric Capital Canada “unless a labour cost realignment is achieved to halt such losses,” said McDonald.
Last night, Air Canada’s 3,100 pilots remained the lone holdouts in tense labour talks that have already netted $776 million a year in concessions from eight unions and managers at the main airline and its regional carrier Jazz.
They say they’re being asked to take an unfair portion of cuts and remain firmly opposed to company plans to shift more of Air Canada’s flying to the regional carrier Jazz and its lower-paid pilots.
Even if the pilots agree to $257 million a year in concessions, including 821 job cuts — more than a quarter of their ranks — “the company will require access to substantial amounts of new capital” to restructure, McDonald said.
Things could get even worse given that the report doesn’t reflect the full brunt of the newest SARS outbreak to hit Toronto. The first bout forced Air Canada to ground aircraft and cut some once-lucrative Asian routes after overall traffic nose-dived 20 per cent in April and 60 per cent on some Asian routes.
The board was facing a number of options last night. It could:
Ground Air Canada’s 330 aircraft and liquidate the company, a drastic but unlikely move — at least for now — that would throw 40,000 people out work and leave dozens of small communities with no air service.
Accelerate all 7,800 recently announced layoffs, some of which weren’t due to take effect for up to three years.
Announce the need for thousands more layoffs and the need for millions more in concessions, citing the devastating effects of the second, unexpected SARS outbreak — a desperate move that some fear would anger union leaders to the point of jeopardizing existing deals.
Resign en masse unless the pilots have reached a deal overnight, out of fear of personal financial liability if cuts are achieved quickly.
There’s considerable confusion over whether Mr. Justice James Farley, the Ontario Superior Court judge overseeing Air Canada’s complex restructuring, has the power to order a deal with the pilots, something that has apparently never been done by an Ontario court.
There’s also considerable talk of Ottawa using its powers, through an Order in Council, to force concessions on the pilots in an effort to stabilize the national carrier.
By late yesterday, Air Canada had finalized contract language with most of its unions, removing no-layoff provisions that were supposed to be in place until at least next year.
“Now they can downsize as far and as fast as they want,” said one union leader, who didn’t want to be named. “No-layoff clauses are gone from all the contracts.”
The pilots’ lawyer told Farley yesterday that his clients account for just 10 per cent of the workforce and 22 per cent of payroll, but are being asked for 31 per cent of all concessions.
While Air Canada had originally been demanding about $199 million in concessions from the pilots, that number jumped to $257 million this week, Richard Jones, the lawyer for the Air Canada Pilots Association (ACPA), told the court yesterday.
“How can ACPA recommend to its members the kind of sacrifice that’s now being demanded by Air Canada?” asked Jones.
Last night the pilots remained firm that they wouldn’t be forced into a “bidding war” for work with their lower-paid counterparts at Jazz, a move Jones termed an “unfair labour practice” that has “devastated” the ACPA contract and would see the traditional Air Canada “dwindle away over the years.”
Farley made it clear that he was particularly frustrated by the pilots’ refusal to participate, as did all the other unions, in a court-ordered mediation process overseen by Mr. Justice Warren Winkler.
Many union leaders have credited Winkler for the quick pace of the negotiations and the full protection of their pension plans, despite the fact the plan remains about $1.3 billion under-funded by the cash-strapped airline.
The pilots had already agreed to a number of concessions — including pay cuts — and felt appointing a mediator was “premature and extremely disruptive,” said Jones.
Farley called that decision “very puzzling, very troubling,” adding later that his “independent sources” paint a different picture of the pilots’ willingness to negotiate.
In a lengthy and carefully worded speech, part of it a veiled warning that the pilots in particular could have trouble finding work here in Canada if Air Canada is grounded, Farley cautioned that the failure of Air Canada “will be a severe disruption for the people of Canada.
“There will be some chaos,” and a gap that will be filled by domestic and foreign competitors, he said.
Many believe that this scenario is the result of forcing Air Canada to merge with CP and maintain rural routes. The arguement being that CP should have been allowed to die a natural business death. So many people are being layed off anyway.
By: Whiskey Delta - 3rd June 2003 at 14:51
It most likely has to do with the school system with how much extra time you have to but in but most teachers I know aren’t subjected to much. Plus, most jobs require extra time beyond the stated hours too so there is very little simpathy from others. Yesterday I was at work for 13 hours and got payed for less than 8. It’s the nature of the beast.
By: mongu - 3rd June 2003 at 14:43
I said that to my fiancee once (she’s a teacher). She wasn’t impressed!
To be fair, she has to take work home a lot more than I do, and she probably works 2 hours a day extra. That equates to 10 hours a week unpaid. Before bringing the work home, she works 9-5 or sometimes 9-6 even though the kids clock off at 3.30.
Then of course the people at the Education Department are the most illogical, petty, totally unreasonable, beaurocrats in the history of mankind – which adds stress.
But if money was your motivator, why wouldn’t anyone just shrug their shoulders and train as a lawyer?
By: Whiskey Delta - 3rd June 2003 at 03:22
Originally posted by greekdude1
HERE, HERE! Teachers don’t make nearly what they’re worth.
Years ago I would have agreed but now but with an average starting salary being roughly $40,000 it isn’t that bad. Every weekend off, every holiday off, 3 weeks off for Christmas and 3 months off for summer? Not too shabby for 9 months of work.
By: greekdude1 - 3rd June 2003 at 02:01
Originally posted by mongu
I’m just saying that a person’s worth is not necessarily the same as their wage value.
HERE, HERE! Teachers don’t make nearly what they’re worth.
By: robc - 2nd June 2003 at 16:08
What mongu said,
Skill, training and responsibility do not entitle anyone to earn a certain amount.
To me those are what should determine a salary in the airline business.
By: MapleLeaf_330 - 2nd June 2003 at 14:53
The issue is that AC wants to move most of its domestic pilots to its regional arm, Jazz, where pilots apparently make substantially less than mainline pilots, rumoured even less than Westjet’s pilots. AC will be reducing most of its widebody service within Canada and moving to 110 seat next generation (assuming A319/20/21) for point to point service as opposed to the current hub and spoke set up. they were also asked to take wage concessions, work more hours, and take a cut to benefits.
They reached a tentative agreement three hours after the deadline on Sunday morning. Details have not been revealed and the pilots will be voting soon. Apparently AC was minutes away from collapse. Though it is said that the airline would have been liquidated as an operating company (as opposed to non-operational) at a very cheap rate. It would almost have to remain operational with 80% of market share and coast to coast operations.
By: mongu - 2nd June 2003 at 11:12
I know, and I’m not trying to demean the value of pilots. I’m just saying that a person’s worth is not necessarily the same as their wage value.
Otherwise firemen would all drive Ferraris!
Now, pilots do generally earn more than firemen because they are more highly trained. Because of that, there’s upwards wage pressure (supply and demand again) but the wage will only naturally go so high – probably to a point below what a pilot would consider he is worth.
By: Whiskey Delta - 2nd June 2003 at 03:01
Originally posted by mongu
Skill, training and responsibility do not entitle anyone to earn a certain amount.
That sure is a bold statement. How much is a flight crew worth when an engine throws a fan blade? When the weather is 100 foot overcast with 45 knot winds? When at 35,000 feet aircraft goes dark with a full electrical power loss? They are worth as much as the ramper?
What’s the common result of errors by the following airline employees?
Rampers
Dispatchers
Air Traffic Controllers
Fuelers
Mechanics
If any of these people screws up the Pilots die. These folks still go home to their familes that night.
Here’s a recent 1900D accident here in the States.
http://www.avweb.com/newswire/9_22b/complete/185073-1.html#3b
The mechanic decided to skip 5 steps in the maintenance procedure and as a result 21 people died. The pilots didn’t even have a chance as the forward yoke movement was limited to nothing more than a few inches.
What about United flight 232? The work of those pilots saved the lives of most the people on board. The high school dropouts loading bags did nothing to save those passengers.
The problem in this day and age is that people take flying for granted. They think nothing of sitting in a multi-million dollar aircraft blasting through the sky near the speed of sound 7 miles above the earth. They all see the pilots job as being easy, pushing buttons and nothing more, unaware of what really goes on beyond the now bullet proof door. We’re trained professionals, of course we’re going to make it look easy. I can’t even tell you how many “oh s#$%” moments I’ve been apart of in a cockpit without the passengers knowing a thing. All we get at the airport are barbs about a rough landing. “You’re welcome for us saving your butt up there.”
I’ve watched people tip their cab driver more that I get paid to fly from NYC to Chicago in the busiest airspace in the world. All the passenger wants is a cheap ticket at the cost of the employees paycheck, specifically those highpaid pilots.
Here in the US those rampers are pulling down more money in their 1st year than I will by my 5th. These guys graduated high school, took a 2 week course and pull down some pretty good money. If the company tanks, they’ll come to us looking for the concessions. I have friends making slightly above what qualifies for Food Stamps (government food allowance) being asked to give up a part of their income to save the company.
Does anyone really know what the AC pilots are making? Or are they just assuming that they are all making $200,000 a year with 20 days off a month?
Sorry for the rant, it’s a bitter subject. 😡
By: mongu - 2nd June 2003 at 01:36
They’re just thinking that they’ll do what their union advises them to do. One of the dangers of unions, I suppose – they can be too powerful.
By: greekdude1 - 1st June 2003 at 19:53
Ok, I stand corrected Wysiwyg. I will change my stance now to: WHAT ARE THE PILOTS THINKING! Don’t they want to keep their jobs AND the maple leaf in the air???
By: wysiwyg - 1st June 2003 at 12:46
Originally posted by greekdude1
What do the pilots care? If AC goes under, then they will get a short, unpaid vacation, then go work for another airline that operates the aircraft they are certified on.
If only that were true! North America is one of the hardest markets to find work in, even if you are type rated!
By: Saab 2000 - 1st June 2003 at 09:01
Well Jazz will become Canada’s “national low cost airline”
By: mongu - 31st May 2003 at 21:40
Originally posted by robc
Are you saying then it is fair for ground crew or check-staff to have to give up less then pilots?
Not at all. I think the unions have created a distored wage reality which is one of the reasons (one of many, it’s hardly all down to them) why many airlines are under pressure. I’m not commenting on AC specifically because I am not familiar enough with the background.
By: robc - 31st May 2003 at 21:40
Well, if both the pilot and ramp worker got a 10% pay cut say, the pilot would give up more than the ramp worker, but hey everyone wants to benefit the most or give up the least.
By: greekdude1 - 31st May 2003 at 21:14
What do the pilots care? If AC goes under, then they will get a short, unpaid vacation, then go work for another airline that operates the aircraft they are certified on.
By: Saab 2000 - 31st May 2003 at 20:43
I don’t think it is unfair, I think that pilots recieve more and therefore should put out more in concessions. The pilots are making a great deal more to lets say, a ramp worker. They account for nearly 25% of the labour costs at Air Canada. If their airline is in need of desperate help and their jobs are on the line then those with the most should probably give the most so to speak . In the end they have more to lose by not accepting the deal.
If an equal percentage were to be agreed then pilots would come out with an okay salary to keep them going, what about your average ramp worker? A salary below the cost of living. Sure it might not look good and fair that 10% must take higher cuts but it seems reasonable considering they make up 25% of the actual labour costs.
To my actual understanding the younger pilots have agreed to much of the concessions and they will sadly be hit hard but they have seen what is at stake. However, senior members who have a very good salary seem to be holding on. Just does not seem logical though who knows what the real picture is, that is just my opinion.
By: robc - 31st May 2003 at 17:55
Are you saying then it is fair for ground crew or check-staff to have to give up less then pilots?
By: mongu - 31st May 2003 at 16:13
No one “deserves” anything.
I think my house is worth £1,000,000. I deserve to get that much when I sell it!! Guess what…the market disagrees with me and I’ll only get what a buyer is prepared to pay me, which sadly is somewhat less.
Skill, training and responsibility do not entitle anyone to earn a certain amount. Supply and demand determine wages in the long run! To a certain extent, collective pressure (unions) can push wages up, but in the end it boils down to simple….supply and demand.
By: robc - 31st May 2003 at 10:32
A pilot is more skillfull and has had a much harder training, along with the huge expensis of training, so they deserve to have a much higher pay, along with the responsibilty of hundreds of peoples lives, why should one occupation within AC have to suffer more than others, why cant every one make equal amouts of conccesions?
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May 30, 2003 at 2:05 pm