Sign in to follow this  
dagger

AC challenges ONEX takeover of WS on foreign ownership loophole

Recommended Posts

https://www.theglobeandmail.com/business/article-air-canada-files-challenge-with-canadian-transportation-agency-over/

 

In its letter, Air Canada argues that foreign co-investors could take larger stakes in Onex subsidiary Kestrel Bidco Inc. − which is the actual purchaser − and take on greater control of the Canadian airline. “The opaque nature” of the private-equity structure “obfuscates where actual control in fact will, in fact, rest,” Air Canada said.

Air Canada also argues that Onex does not have sufficient controls in place to assure WestJet remains Canadian. For instance, it says that although Mr. Schwartz indirectly holds 100 per cent of Onex’s multiple voting shares (MVS), “the MVS structure provides no assurance that this will continue to be the case. The potential for the MVS extinguishment is real given Mr. Schwarts’ current career stage. At 77 years old and having served as CEO since 1983, his eventual retirement should not be considered a remote eventuality.”

Air Canada said in its letter to Canada’s transportation regulator that “due to the structure of the transaction and the capital and corporate governance structure of Onex, the transaction may result in an undertaking that is not ‘Canadian.’ "

 

 

Edited by dagger

Share this post


Link to post
Share on other sites

Well, AC's objection is valid.  They are not against the buyout, just against it as structured.  Onex simply needs to ensure the rules are followed.  As an aside, you can be sure WS would object if AC was involved in a buyout  with the same concerns (and that would be appropriate).

Share this post


Link to post
Share on other sites
9 hours ago, CanadaEH said:

This should be fun. 

It's more technical than anything, the deal in some form will certainly happen, it's just that ONEX may have to make legal changes to satisfy the government, perhaps maintaining a tracking mechanism to show ongoing compliance with the law and a mechanism to intervene if stock sales render the company non-compliant.

Basically, if Air Canada didn't object now, it wouldn't be in a good position to intervene years down the road if a sale of WS shares did go over the foreign ownership limit

For everyone else, employees, customers, communities, nothing is going to change because of this challenge. 

  • Like 3

Share this post


Link to post
Share on other sites

I get it. Makes sense. 

Part of me hopes WJ challenges the AT purchase to bring some excitement back to the Canadian aviation scene. I mean, Porter quietly goes about its business. BORING.. Jetlines' never ending upcoming launch that never seems to get closer is old hat. So is the eigth or ninth CEO announcement that nobody cares about. And... That's it? 

But how about those food court announcements for YVR? Looking forward to the increase in intoxicated flyers. 

Share this post


Link to post
Share on other sites
13 hours ago, CanadaEH said:

I get it. Makes sense. 

Part of me hopes WJ challenges the AT purchase to bring some excitement back to the Canadian aviation scene. I mean, Porter quietly goes about its business. BORING.. Jetlines' never ending upcoming launch that never seems to get closer is old hat. So is the eigth or ninth CEO announcement that nobody cares about. And... That's it? 

But how about those food court announcements for YVR? Looking forward to the increase in intoxicated flyers. 

The government is doing what I would call an exhaustive review of the AT purchase that could last into Q2 2020. I expect that once the feds, including the Competition Bureau, get through with it, AC will have made some concessions in order to make the deal fly, and ,make it bullet proof. There is no way AC wants to own or manage hotels in the Caribbean or travel offices anywhere. It won't keep a Terminal 3 presence in Toronto, and might well agree to airport changes elsewhere (I haven't given that any thought). It will likely make job and possibly regional flying concessions to the Legault government to get its unequivocal endorsement. 

Share this post


Link to post
Share on other sites

There is no room for any AT aircraft at T1. CYYZ just added a large number of T1 hard stands with bus ops due to overcrowding.

Share this post


Link to post
Share on other sites

AC claims to have no plans to merge TS into AC or Rouge, although I don't think anyone believes it.  I don't see why TS wouldn't continue to operate from T3 at YYZ at least as long as they remain separate.

Share this post


Link to post
Share on other sites
On ‎9‎/‎3‎/‎2019 at 10:35 AM, dagger said:

It's more technical than anything, the deal in some form will certainly happen, it's just that ONEX may have to make legal changes to satisfy the government, perhaps maintaining a tracking mechanism to show ongoing compliance with the law and a mechanism to intervene if stock sales render the company non-compliant.

Basically, if Air Canada didn't object now, it wouldn't be in a good position to intervene years down the road if a sale of WS shares did go over the foreign ownership limit

For everyone else, employees, customers, communities, nothing is going to change because of this challenge. 

"Satisfy the government"? The "government" already approved the deal. This is just part of Air Canada's old "bait 'n switch" tactic.

And it is to distract the competition bureau of the real threat to Canadian consumers due to the acquisition of Air Transat which eliminates competition.

Air Canada knows that there is no way its deal is going to be approved without major divestures and concessions. At minimum it will be required to relinquish all gates and space at T3, open Aeroplan to another airline (as back in 1999 take over of Canadian), and give up some routes that will be entirely be controlled by it after the merger, among perhaps other things. 

Share this post


Link to post
Share on other sites
15 hours ago, CanadaEH said:

... Porter quietly goes about its business. BORING... 

First it was the prediction of imminent bankruptcy (13 years ago), now it's "boring"?!!😯 Plus, looks can be deceiving...

Share this post


Link to post
Share on other sites
11 minutes ago, MD2 said:

And it is to distract the competition bureau of the real threat to Canadian consumers due to the acquisition of Air Transat which eliminates competition.

Why doesn't Porter order a great big fleet of longer range aircraft to provide competition then?

Share this post


Link to post
Share on other sites
6 minutes ago, FA@AC said:

Why doesn't Porter order a great big fleet of longer range aircraft to provide competition then?

In case you didn't notice, it did. Air Canada didn't like that idea either and through its proxies fought that too!!

Share this post


Link to post
Share on other sites
7 minutes ago, MD2 said:

In case you didn't notice, it did. Air Canada didn't like that idea either and through its proxies fought that too!!

Have you considered decaf ???

Share this post


Link to post
Share on other sites
9 minutes ago, MD2 said:

In case you didn't notice, it did. Air Canada didn't like that idea either and through its proxies fought that too!!

I must have missed that.  I have no recollection of Porter placing an aircraft order in order to provide competition on any of the AC/TS routes that you claim will lack competition once the takeover deal closes.  Was it recent?

Share this post


Link to post
Share on other sites
1 hour ago, FA@AC said:

AC claims to have no plans to merge TS into AC or Rouge, although I don't think anyone believes it.  I don't see why TS wouldn't continue to operate from T3 at YYZ at least as long as they remain separate.

AC says they won’t merge TS into AC or Rouge.  They also say they will abide by the ACPA agreement.  The solution maybe to keep TS, expand it to the ACPA collective agreement and dissolve Rouge. The TS brand is much more valuable than Rouge and the existence of both is redundant.

Share this post


Link to post
Share on other sites
8 minutes ago, Turbofan said:

AC says they won’t merge TS into AC or Rouge.  They also say they will abide by the ACPA agreement.  The solution maybe to keep TS, expand it to the ACPA collective agreement and dissolve Rouge. The TS brand is much more valuable than Rouge and the existence of both is redundant.

The existence of both Rouge and Air Transat is probably redundant from the marketing standpoint, but AC has incredibly cheap FA labour at Rouge and AC will want to keep it that way.  My understanding is that Pilot labour costs at TS are far low than they are at AC.  Management won't be in a hurry to change that either.  It'll be really interesting to see what pans out.  Negotiations around the workforce integration, if/when they occur, will be complex.

Share this post


Link to post
Share on other sites

I still think that the acquisition of AT will absolve AC from the provisions of the ACPPA as it applies to AC Mainline and Rouge.  If AT is Owned by AC then they just have AT meet all the requirements for doing business in Quebec and having a headquarters there.  Get maintenance done in YUL and YWG and then the Mainline can do whatever it wants.

Transat can just go about its business.

Share this post


Link to post
Share on other sites

The other thing to keep in mind is “Common Employer”. That’s bound to come to the surface sooner rather than later if they do plan to maintain separate operations. 

Share this post


Link to post
Share on other sites
1 hour ago, J.O. said:

The other thing to keep in mind is “Common Employer”. That’s bound to come to the surface sooner rather than later if they do plan to maintain separate operations. 

My guess would be "sooner".

Share this post


Link to post
Share on other sites
20 minutes ago, seeker said:

My guess would be "sooner".

Maybe the win would be to only take on the aviation part and let Onex or indeed WestJet have the hotel business. ? 

Share this post


Link to post
Share on other sites
14 hours ago, seeker said:

My guess would be "sooner".

Sooner probably means mid-2020 or later since this deal isn't likely to be approved until Q2 2020.

Share this post


Link to post
Share on other sites

I wouldn't bet on 2020 at all!

This merger, as proposed, is unlikely to be approved next year, even by a friendly liberal government. It eliminates competition and gives Air Canada a very dominant position in sun destinations and Europe, for instance a total monopoly between anywhere in Canada and LHR. Therefore, it likely requires extensive modifications and negotiations, including divesture of assets and routes. It is also possible that modifications will make the deal so unattractive to Air Canada that it will walk away from it altogether if the government can offer a "politically safe alternate".

Share this post


Link to post
Share on other sites
5 minutes ago, MD2 said:

It eliminates competition and gives Air Canada a very dominant position in sun destinations and Europe, for instance a total monopoly between anywhere in Canada and LHR.

There is an airline called British Airways that operates between several points in Canada and LHR and that is free to add service to additional Canadian cities whenever it chooses.

  • Thanks 1

Share this post


Link to post
Share on other sites
16 minutes ago, FA@AC said:

There is an airline called British Airways that operates between several points in Canada and LHR and that is free to add service to additional Canadian cities whenever it chooses.

I suspect that 30% of AC's LHR slots will be soon turned over to WestJet. It's the only fair way to protect the Canadian consumer.

All those shiny new 787's WJ has coming will fit into there nicely. 😎

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Sign in to follow this