Acpa's Response To Arbitrator's Award

[FA@AC]

Is AC actually dumb enough to ignore an opportunity to mitigate the otherwise fixed expenses associated with the CPA?

AC was dumb enough to enter the CPA under the rates it did.

[Say Altitude]

Dag - only going by memory or "he said/she said" but isn't there a provision for an opener in 2015?

[skyline]

Dagger. Because your house is on fire shouldn’t make you wish your neighbours to catch fire, unless of course it makes you feel better. Jazz has done a good job and is most likely part of the master plan. This new contract will negatively affect everyone in the industry.

[rudder]

Dag - only going by memory or "he said/she said" but isn't there a provision for an opener in 2015?

The CPA terms are for the most part available in documents located at SEDAR for CHR or at www.flyjazz.ca under the investor banner.

No basic opener. There are trienniel rate resets and further benchmark exercises that can affect margin. Also, there are AC domestic market share reviews that commence in 2015 which could see reductions in block hour guarantees.

[dagger]

AC was dumb enough to enter the CPA under the rates it did.

ACE set the formula to make Jazz attractive to investors. Each subsequent hiccup at AC has given it a chance to re-negotiate the terms, but there has not yet been an "AVEOS moment" when the vendor implodes because of its own inefficiency and high costs. I expect the process to move towards a workout for Jazz investors and ultimately Jazz employees. The only question is how long it takes.

Chorus' current yield is 18.30%

There is a clear expectation that the dividend is unsustainable. That's essentially what Bay Street already believes, which is being baked into stock recommendations I've seen recently.

[dagger]

dagger,

You seem to be previewing the AC opening salvo at Jazz - give us a better deal or we will allocate the new work elsewhere. That is a great opening position but it would be both naive and ignorant to ignore that absent another CCAA filing AC has contractual obligations to Jazz in the $billions$ over the next 8.5 years remaining in the current incarnation of the constantly evolving CPA that unfortunately is predicated on an aged and inefficient fleet of aircraft, many of which are under the primary control of AC.

Is AC actually dumb enough to ignore an opportunity to mitigate the otherwise fixed expenses associated with the CPA? I would hope not. And the only path to reduced expense is a deal with Jazz that consensually modifies the CPA to reflect fleet replacement and makes the necessary adjustments to guarantees so that it is not a capacity windfall to Jazz and is done on economic terms that reflect the burdens borne by each of the parties.

Sit back and watch. You might be surprised by the result.

I expect AC to do both. I expect more work to be bid and Jazz/Chorus to have the chance to bid into that, but at the end of the day, the route to satisfy both parties is to stiff the Jazz unit holders so that they carry more of the financial can for re-fleeting. It's in the interest of Jazz/Chorus to reach a new deal in order to capture growth and secure a long-term future. It's no longer an income trust, and as a dividend paying corporation can adjust its priorities to funding growth instead of paying an 18.30% dividend. Jazz does have advantages - it just got $16 million in free money from the Nova Scotia government to basically screw London and consolidate its maintenance ops in Halifax.

[mexico bond]

So AC want to park all the CRJ 100/200 (thank god). JAZZ has 35 in their fleet, which the crew would move at no cost, fully trained to the CRJ 705. If Jazz were to receive 2-705 per month, this would take 17 months to happen. As for the additional aircraft it would take another year to get up to the 60 aircraft. Jazz would have to train additional 250 pilots and 200 FA's over this period. This is something JAZZ could handle. Show us any other regional that could handle this (they would have to train 600 pilots and 600 FA's), there is no other airline in Canada that could ramp up this quickly. Sky Regional couldn't even handle 4 aircrafts, Their OTP is one of the worst in the industry compared with Jazz which is one of the best. As for an American airline coming in to do any of the flying, They would have to have French qualified FA's if they are going in or out of YYZ and YUL as per the OLA.

AC Management will have to much on their plate with the LLC to worry about. Jazz is the most easy route and management like easy.

[airt]

The CPA terms are for the most part available in documents located at SEDAR for CHR or at www.flyjazz.ca under the investor banner.

No basic opener. There are trienniel rate resets and further benchmark exercises that can affect margin. Also, there are AC domestic market share reviews that commence in 2015 which could see reductions in block hour guarantees.

In a perfect world that's how it works.

The Ruling Government has shown us all that they will ignore any previous conventions and create/interpet/twist laws as necessary to keep AC on life support.

I would not take any comfort at all in that contract.

With what this government has done to the unions at AC , Canada begins to look like Chavez and Elbegdorj.

[rudder]

AC was dumb enough to enter the CPA under the rates it did.

OK. So you bought the house but now but prices have dropped and you feel that you overpaid. Can you just give it back? No.

Unless AC shrouds itself in the veil of CCAA - and wipes out the owners (again) - it must honour the terms of its agreement or attempt to negotiate modified terms. I do not see Lisa Raitt riding to the rescue on this one so it will have to take some enlightened minds to achieve a fair compromise that equally benefits both parties to the CPA.

[boestar]

The fleet is not being replaced on an aircraft to aircraft basis. The number of aircraft in the fleet is decreasing while the number of seats is only reduced by 6. This is with the introduction of the Q400 and the exercising of the options. Since the number of aircraft in the jazz fleet is decreasing the crewing requirements are easier to handle. The next thing jazz needs to do is replace the DH8 100/300 fleet with a new more efficient model.

Jazz has proven that they can handle the task of ramping up an operation in a very short period of time with the Thomas Cook operation.

[rudder]

In a perfect world that's how it works.

The Ruling Government has shown us all that they will ignore any previous conventions and create/interpet/twist laws as necessary to keep AC on life support.

I would not take any comfort at all in that contract.

With what this government has done to the unions at AC , Canada begins to look like Chavez and Elbegdorj.

Sorry. Exercising options available under the Code or even creative legislation pertaining to labour rights is one thing, screwing with commercial contracts of publicly traded companies is another. Nobody at the YUL HQ is dumb enough to believe that there is relief from YOW for the CPA. There are just 2 doors to modifying/terminating the CPA - negotiation or CCAA. And CR has done everything in his power, and then some, to avoid another CCAA.

[mexico bond]

I guess Jazz could get some of their money back from the Pluna. They have 13 CRJ 900 on the block and it would be a quick fix to make them 705.

[airt]

Sorry. Exercising options available under the Code or even creative legislation pertaining to labour rights is one thing, screwing with commercial contracts of publicly traded companies is another. Nobody at the YUL HQ is dumb enough to believe that there is relief from YOW for the CPA. There are just 2 doors to modifying/terminating the CPA - negotiation or CCAA. And CR has done everything in his power, and then some, to avoid another CCAA.

Until this spring I would have totally agreed with you and you are correct in that it is somewhat apples and oranges.

My beloved Conservatives have shown me too many times in their Reign that they will do whatever they deem necessary to achieve the "goal of the day". Can you say Prorogation?

I still say anything's possible with this lot.

[FA@AC]

OK. So you bought the house but now but prices have dropped and you feel that you overpaid. Can you just give it back? No.

Oh, I understand that. My point was that AC has made many imprudent decisions and that I wouldn't necessarily count on its management to choose the wise course of action--whatever it is--now.

[Lakelad]

.

Air Canada labour settlement could lead to wider industry shake-up

Jul 31, 2012 – Financial Post

Scott Deveau

Shares in Air Canada rallied Tuesday after an arbitrator sided with the country’s largest carrier in its lengthy and bitter labour dispute with its pilots.

The new five-year contract, which was selected in final-offer arbitration, is expected to have an impact not only on Air Canada but could shake up the industry as a whole, analysts said.

Cameron Doersken, a National Bank Financial analyst, said he viewed the decision by the arbitrator late Monday as positive news for Air Canada.

“This is the last union contract to be settled, ending a tumultuous period of labour instability for Air Canada,” he said. “The new agreement opens the door for substantive changes to Air Canada’s business, including the establishment of [a new low-cost carrier], more regional flying and potentially major fleet changes.”

While Air Canada has yet to outline exactly what its next steps will be, Mr. Doerksen said the changes contained in the contract would likely have an impact on several players in the Canadian industry, including Chorus Aviation Inc., Air Canada’s primary regional affiliate; WestJet Airlines Ltd., and possibly planemaker Bombardier Inc.

At the heart of it all are changes to so-called “scoping” clauses contained in the contract, which put restrictions on the type of flying Air Canada and its partners can do.

The new pilots contract not only opens the door to the launch of a new low-cost carrier, using a fleet of up to 30 Airbus A319s and 20 Boeing 767s, it potentially allows Air Canada to increase the number of smaller regional jets it operates to 60 76-seat planes. It could also let the airline find new regional partners and allow it to phase out its Embraer regional jets and Airbus narrowbodies in favour of a more competitive fleet, Mr. Doerksen said.

'the choice of A319s for its low-cost carrier was “odd” given the aircraft is not generally considered a cost-effective option on the leisure routes it would compete on.'

.

[Mitch Cronin]

“This is the last union contract to be settled, ending a tumultuous period of labour instability for Air Canada,”

[emphasis added]

Boy the bean counters have it all figured out, don't they?

Somehow, stripping employees of their rights to collective bargaining and shoving an "agreement" [that's an example of Orwellian "Newspeak", isn't it?] up their hyneys, ends labour instability?

I guess time will tell, but I sure have doubts.

[Dork]

A massive pension heist is in the works in North America. Once the domestic operation has been outsourced and 2 tier scewered ( the pensions are due there in 2022 due to the demographics)....within 5-7 years the overseas operation will be outsourced to an offshore entity. Next you take retirees to court and demand a cut in their benifits.

How has the executive compensation been paid..... If you transfer the wealth of a workers pension plan to the tune of $8 Billion dollars to the positive side of the ledger.....management is a paltry price to pay.

Pension law in Canada is strong...if you cripple a company you can get around it. Let someone else do the mechanical work and flying outside the country.

Nice to have a generic conversation. The Soviet Union used to monitor it's citizens and jail or punish their families for speaking out.

We are free here.

Dork

Freedom is having a dollar in your pocket...too bad the politicians and corporate magicians are the only ones left with that right.

We could be talking about any business in Canada, the US or Australia. Democracy is a nice theory...capitalism is the reality.

[Fido]

.

Mr. Doerksen said.

'the choice of A319s for its low-cost carrier was “odd” given the aircraft is not generally considered a cost-effective option on the leisure routes it would compete on.'

Another dumb comment from Mr Doerksen. I guess Allegiant, EasyJet and Air Berlin selecting the 319 is odd too.

[proview]

Another dumb comment from Mr Doerksen. I guess Allegiant, EasyJet and Air Berlin selecting the 319 is odd too.

I would not be so rough with Mr. Doerksen about this. He is merely referring to the previously announced purpose of this Air Canada 'Low Cost Carrier' to compete with the charter carriers like Transat and Sunwing in the Mexican and Caribbean vacation business. The most used aircraft there are low time B737-800s with 189 seats. Flying wingtip to wingtip against these with high time A319 aircraft with fewer seats does cause one to wonder. Perhaps the eventual Air Canada business model will be different from what we have been led to believe.

[xxx]

I do not understand.

Air Canada is competing with companies that use foreign pilots and wet leased aircraft from bankrupt

countries of Europe. How are they to compete?

The government then squashes airline labour movement in Canada , allows these airlines to get temporary foreign pilots ( under the same program as nannies and farm workers) , and expects everything to be back to normal.

Btw, the experience level of these foreign crews is definitely in question, but they are cheap and people can get their cheap holidays.

Pathetic

[dagger]

I think it's important to note with respect to the 319s is that they are placeholders. AC's commitment is to have Airbus narrowbodies or equivalent. Nothing says they absolutely have to use those planes. The 767s are a little firmer because you can really dense those up by going all-economy. But they don't have the range to do some the Pacific well, so who knows, AC still has loads of 777 and 787 options. What I find most interesting is the plan to remove the Embraers, starting almost certainly with the 175s. You can spool up regional capacity with 76 seaters, and the 175s disappear overnight. Some of the 190s could go with further regional expansion, but you can also see a narrowbody fleet renewal program around the two C-Series models and the Airbus Neo.

I'd think Bombardier would cut Air Canada and Chorus an enormous deal on a C Series/CRJ package.

[JL]

I sense an overall lack of satisfaction with the Embraer from the various articles but I don't see the reason in my malinformed view;especially the 190. It's a pleasure to fly on (except for the noisy starts on cold days), relatively fast (sched times are a bit quicker than the Bus) and as far as I know the only AC aircraft that could do RNP 0.1 procedures. Why does it carry the scarlett letter?

[neverminds]

Well for one thing they won't be able to do CAT3 approaches in YYT when the system becomes functional in YYT. The E190 is currently used heavily in YYT and doesn't have an auto land like the bus or HGS like the CRJ to do a CAT3

[dagger]

I sense an overall lack of satisfaction with the Embraer from the various articles but I don't see the reason in my malinformed view;especially the 190. It's a pleasure to fly on (except for the noisy starts on cold days), relatively fast (sched times are a bit quicker than the Bus) and as far as I know the only AC aircraft that could do RNP 0.1 procedures. Why does it carry the scarlett letter?

I think it's purely a cost thing. No scarlett letter. I'm sure each aircraft type has its operating and maintenance quirks, but the 175 was only acquired for scope reasons that no longer apply, and there are more efficient planes on the market than the 190. If AC puts more 705s into the Air Canada Express system, and goes for something like the CSeries, it could eliminate all of the 190s. AC got a very good deal on the 190s in particular, and sub-leasing them for full ownership cost recovery is a real possibility. There are lots of permutations and combinations for fleet change and renewal coming out of this arbitrated agreement with ACPA.

I'm looking forward to the conference call next Wednesday for the second quarter earnings. We may get more info on which direction the airline is taking on LCC, fleet renewal, etc.

[Dropzone]

As AC splits, subdivides and dismantles we'll all be left with WJ as the biggest and strongest in the country.

I'm sure to some people that might seem a great victory, however with that goes responsibilities and political challenges impossible for any company to live up to...........

My advice to any young gun is to go off shore if you truly want a rewarding career. Opportunities abound.

The race to the bottom in Canada is moving much faster than I thought.