AC Value soars to 2.2B

[Vsplat]

Specs, how many of your engineers are earning less than $45K, including overtime?

With all of the hiring, all of the AC pilots under 2 years (and we are talking hundreds) are right there. Prior to the Pay Group, the CRJ FOs were making less than that when they came off flat salary.

Stop looking at the top of the ladder. More and more members start so far behind that they won't catch up to their engineering counterparts for 10 years. That's a good chunk of the time when the kids are still at home. When the money comes, it's too late....

Vs

[dozerboy]

Specs,

My point is not to look at our top scale. Very few are there. Look more to the middle or lower where the majority of our pilots are. I am not crying the blues, it is a choice we all made, the point was more about engineers, certainly the ones that I know.

cheers

[Specs]

Oh stop it. I'm looking at the paychqs of family members and childhood friends. For most of my comparissons we all started at AC within 2 yrs of each other. Engineers vs RJ/320/Dash 8 FOs. Av college vs University, and we all get together with families 2 or 3 times a month.

The reality is that within 2 yrs the pilots were way ahead of the engineers. Those are the facts.

5 years in, even with the cuts and demotions they were still ahead. Those are more facts.

These are my friends and family. I don't begrudge them a thing and I'm pleased for their success. But they don't throw out ridiculous generalizations and about how hard they are done by. Yes the cuts hurts ,and they had to adjust but they still have their perspective and don't go crying to mom or big brother over the injustice. And I've never once heard any of them threatening about 2009 and getting payback. Coming up on 8-10 yrs in, they've all moved up, down, and back up again and they're all still quite happy and content.

"how many of your engineers are earning less than $45K"

Actual numbers I can't give you but on the ones I do know, 10-15 + asst'd technical staff with degrees, it varies for a number of reasons, but I would say almost all of them (75%) 3- 5 yrs in. There is no overtime.

[dagger]

Well, dozerboy and Vsplat, I admire your concern for your lower-paid ACPA brethren but if you are so concerned, there is a simple solution - reallocate part of your own pay to them. ACPA could have gone in and said to the arbitrator, don't give anybody a raise except the juniors - give them all of the cash you would have paid the entire group. Funny, that wasn't part of your proposal, so I have a hard time taking your concern for the junior pilots seriously.

What you also don't answer is

1. Why should ACPA - or for that matter all the unions - recuperate all of the money they gave in concessions when in fact, the sum of those concessions is more than ACE is making (even with Aeroplan and Jazz)? Clearly, reinstating 100% of the concessions, which is what ACPA advocated for itself plus pension indexing, would bankrupt the company.

2. Why should ACPA pilots make more than their peers in North America? That's what you are asking for when you factor in the cost of pensions and health benefits? US pilots don't have full pensions anymore and they pay for part of the cost of their health benefits. So what entitles you to argue that you should be reinstated to pre-CCAA levels in all respects when nobody in the industry will claw back what they gave unless fuel prices unexpectedly crater. Can you get OPEC to roll back fuel prices to 2002 levels? Can you get the airport authorities to roll back fees to 2002 levels? This is where the industry is at and your pre-CCAA wage and benefit rates are the result of industry conditions which no longer exist.

I probably lost 15% of my net worth with the income trust change, but that's life. I accept that there are changed conditions, I'm not losing sleep over it. It will change some lifestyle decisions, but I cannot turn back the clock, and you won't hear me acting hard done by. It was a nice run while it lasted, just as your pre-CCAA pay scales represented a nice run that came to an end. Henceforth, you will make back what you lost by virtue of what the company is worth, not because of some historical entitlement.

If you want to park the planes in 2009, fine, but you're not going to extort more than a company can afford to pay. AC will go under and take your pensions and jobs with you. That's not a threat, just a statement of the obvious.

[Homerun]

Actually it was part of the proposal, and the priority. Embraer wages, 320 wages, and position group are all about the junior end of the seniority list.

[dagger]

Actually it was part of the proposal, and the priority. Embraer wages, 320 wages, and position group are all about the junior end of the seniority list.

Yes, but not to the exclusion of your other demands.

You wanted every dollar back, plus, plus, plus

That's not what I said. I said did you offer to forego any of your own demands to help your junior colleagues.

Any union can make demands of all kinds, it's paring down the list that's the hard part. I never made a wage demand as a union officer that didn't include justice for the lowest paid, but I have to tell you everyone was in favor of it until it came to the short strokes, and then nobody was ready to give up anything for them.

[mrlupin]

Here is a different spin on things.....

http://www.theglobeandmail.com/servlet/sto...ory/TPBusiness/

Robert Milton's autobiography was called Straight From the Top. The sequel should be titled Straight (Up) from the Bottom: How to Revive a Company in 24 Months or Less. Who would have thought we'd see the day when investors would beg for a piece of Canada's much-maligned airline -- a former bankruptcy case with a sordid, unprofitable past?

But that's what makes the stock market such a fascinating place: The unexpected is always happening. Practically no one, not even the investment bankers, figured Air Canada's initial public offering would be such an easy sell.

But it is. This deal is the hottest new thing since the non-stick frying pan. The bankers' order books are overflowing. Should you join the fun? There's no right or wrong answer, but rather, another question: Are you comfortable buying a stock when the odds of losing are high, and for which the price is based on an accounting invention? If yes, then by all means, call your broker today. But read on first.

Maybe it shouldn't be surprising to see Bay Street go gaga. There aren't many large Canadian companies to buy any more outside of energy, banking and insurance. Money managers also travel a lot, and if you've been on an Air Canada flight lately, you know that it's (a) full ( expensive and © replete with new revenue ideas, like charging $5 for sandwiches with a roast-beef-like substance inside. More than 80 per cent of the seats are occupied, which is excellent.

Print Edition - Section Front

You'd think, given a healthy economy, that the airline would be printing money. And that's where this IPO gets tricky: To know whether the company is undervalued at $2.2-billion, you need some idea of how much money it earns. That's not quite as simple as it sounds.

We know which number the company wants you to use. It's in bold type, on page seven of a "confidential" marketing document for the IPO. Air Canada made $985-million in "adjusted EBITDAR" over the 12 months that ended June 30. To think that humble Air Canada makes almost a billion dollars! And based on that number, the underwriters say, Air Canada is cheaper than United, Continental, US Airways, WestJet and Qantas.

For an airline investor, though, EBITDAR leaves much to be desired. It excludes so much -- like the cost of owning and renting airplanes (that's the "R" in the equation). Once you whittle that away, the figure is somewhat less impressive: $169-million in operating income (that is, before interest and taxes) over that 12-month period.

But even that is not something an Air Canada shareholder could take to the bank. Bondholders still want their interest payments, after all, and that cost the airline $218-million (on a net basis). Which leaves . . . uh, which leaves nothing in the way of profit, actually, unless you want to count on foreign exchange gains or other "non-operating" income.

How do you sell a company for $2.2-billion when it doesn't really make money? You don't: You tell everyone to focus on EBITDAR instead. Or, more legitimately, you talk about how fuel costs are finally coming down, which could give a big lift to the bottom line. But maybe not. Fuel is expensive because the global economy is running strong. If North America slows down, won't the planes get emptier, too? Sixty-one per cent of Air Canada's revenue comes from flights in Canada and the U.S.

So this IPO is really a bet that Air Canada can squeeze out some good years because fuel costs will drop before ticket sales do. That would allow the company to show a profit -- a real one, after all expenses are paid.

It could happen. But potential shareholders might want to know that the airline's top executives aren't staking their paycheques on it. To get a bonus, they have to meet certain financial targets, and guess what they're based on? EBITDAR -- not earnings.

How convenient.

vox@globeandmail.com

Air Canada

12 months ended June 30.

In millions of Canadian dollars

Operating revenue $9,978

EBITDAR* 957

EBITDAR margin 9.60%

Aircraft rent 348

Depreciation and amortization 440

Operating income 169

Interest expense -218

(net of interest income)

* earnings before interest, taxes,

depreciation, amortization and aircraft rent

SOURCE: AIR CANADA PROSPECTUS

[Dork]

A very lucid article. Loved the parts about the accounting practices.

[Vsplat]

Dagger, do you assume that anything you're not personally aware of could not possibly exist?

There are a lot of pilots in ACPA, myself included, that would love to see an end to formula pay and the ridiculous overweighting given to seniority and equipment type. What happens today is that the whole system is so end-loaded that, unless you join in your '20s, the kids are gone before you have the time to spend time and money on them. It's a bad system.

I know it's easier for you to toss cheap shots at ACPA, but more informed comment would be helpful.

Oh, and by the way, the distribution of the raise is still being discussed internally. Don't know where it'll end up, but we are aware that there are pockets of unfairness in the pay structure. Taking a 15% loss like yours would have been a dream compared to what some of these folks and their families have been through.

Funny you talk about parking the planes and the consequences in 2009 on this thread while ridiculing exactly the same comment on another.

Bizarre.

Vs