Gamble may pay off for Air Canada pilots

[Guest ex-SkyGeek]

Gamble may pay off for Air Canada pilots

By ERIC REGULY

UPDATED AT 9:16 PM EDT Saturday, May. 31, 2003

Imagine your life is about to be shredded by an alimony dispute. Your wife wants $10,000 a month in support. You consider the amount outrageous and offer $5,000. She threatens to get a court order for the higher figure. Do you cave in or gamble? The odds the judge will award your wife more than $10,000 are zero -- that was her figure to begin with. The only question is what amount between $5,000 and $10,000 you will get slapped with. You go with the judge.

It appears this is the line of reasoning taken by Air Canada's 3,100 pilots. Management wants them to reduce their cost to the airline by about 30 per cent, through pay reductions, layoffs and more flexible work rules. The pilots said forget it; 30 per cent has been established as the worst-case scenario and we'll gamble that the bankruptcy court proceedings will force us to give up less.

Whether or not you like the pilots -- management paints them as unconscionable, underworked greedheads who should be driving Greyhound buses -- you've got to respect their strategy. They've gamed the system like hard-nosed investment bankers and it might very well work, in the sense that a concession worth 25 per cent could be considered a victory. The fact that all of Air Canada's eight other unions have agreed to substantial cutbacks is largely irrelevant. Boeings and Airbuses tend not to get airborne without someone behind the stick.

Welcome to the silly part of Air Canada's structuring. Everyone -- pilots, aircraft lessors, bondholders, baggage bashers -- knows the pilots' union, called the Air Canada Pilots Association, will make some sort of deal. Equally, everyone knows management's threat to slap the airline into liquidation, perhaps to emerge in vastly truncated form as a subsidiary of Air Canada's Jazz feeder division, is just that -- a threat. The federal government is unlikely to allow a liquidation, lessors don't want to park their aircraft in the Arizona desert, pilots want planes to fly and Air Canada CEO Robert Milton wants to keep his job (though God knows why). Compromises will be found, even if it means the judge, who warned this week of a "cratering" business because of the pilots' intransigence, has to slap some union cement heads around.

At this stage, it's all about brinkmanship on both sides. That's how restructurings work. The job of the management and the board is to make the airline look like it can't afford Windex for the cockpit windows. It sort of worked. The May 29 report of the airline's monitor showed that Air Canada had piled up $730-million in liabilities since the April 1 bankruptcy protection filing. Subtract the $492-million of cash on hand and the airline's liquidity hole is $238-million deep. Quite an accomplishment for a company that's not paying most of its bills.

What management is not highlighting is that the company expects to receive about $320-million from CIBC for advance Aeroplan payments, plus $1-billion or so in debtor-in-possession financing from GE Capital. Add it all up and Air Canada will have access to about $1.8-billion in cash. The airline is losing $5-million a day. Do the math. It ain't going out of business tomorrow even if the pilots' antics continue for a while.

The pilots' big risk is building up a deep reservoir of hatred. The eight unions that have done their bit to save Air Canada obviously resent the pilots for holding out. They will resent them more if they get a relatively sweet deal. Resentment out of envy was a factor even before Air Canada went into bankruptcy protection. Air Canada pilots make on average $180,000 a year, or roughly three times what a flight attendant makes (and more than twice the income of a WestJet pilot). The number of hours they spend in the cockpit is 45. That's 45 hours a month, not a week. Many of the pilots have second jobs and the senior ones have lavish pensions. The Jazz pilots especially resent the Air Canada pilots because the Air Canada pilots are fighting their efforts to fly bigger planes (and thus take some of their jobs). All in the family? Forget it.

Air Canada has had enough problems with warring unions. Warring unions create culture clashes that, in turn, lead to service without a smile.

The pilots are smart enough to realize that holding out for an extra buck might not scuttle the airline, but could easily scuttle any empathy or sense of solidarity from other employees.

Yesterday afternoon, news emerged that the pilots had proposed concessions that would save the airline about $250-million a year. Details weren't available and Air Canada showed little enthusiasm for the offer.

The proposal seemed just enough, though, to take the brinkmanship game back from the brink. Air Canada's liquidation threat is already receding.

ereguly@globeandmail.ca

[Guest WA777]

You shouldn't read much into the article...Reguly has hated Air Canada for a long time, especially pilots...look at just how accurate his facts are...I rest my case.....

[Guest CabinDweller]

”...I rest my case” - W

A much deserved rest it is after your 11.25hrs/wk. (;