Here comes the cavalry?

[Guest Labtec]

The Globe and MAil

Ottawa/Toronto — Ottawa wants assurances that Air Canada will continue to serve small communities and slash its management ranks before the federal government considers aid for the cash-strapped carrier, sources say.

Air Canada announced plans yesterday to chop 25 per cent of the managers at its regional subsidiary Jazz. Last week, Air Canada said it would cut one in five management jobs.

But it's not clear whether these reductions are enough to satisfy politicians in Ottawa who believe the airline's management ranks are bloated and who have a general distrust of the national flag carrier.

"Air Canada has not been the most co-operative and forthcoming even in this situation," a federal source said.

The Montreal-based carrier is struggling under heavy debt, increased competition from low-cost carriers and a drop in passenger traffic because of the war in Iraq.

Last fall, Air Canada cut service to several small communities and there is speculation the airline will pull out of more communities at the end of the summer.

Air Canada officials met yesterday with representatives from five unions to discuss how to mount a co-ordinated lobby campaign for federal aid, possibly involving tax cuts.

Sources said Ottawa is eyeing loans and loan guarantees as possible options to help Air Canada but at issue is whether the federal government steps in before the carrier seeks protection from creditors or after.

Reports yesterday said American Airlines, the world's largest airline, could file for bankruptcy protection as early as next week.

Sources told Reuters that the unit of AMR Corp. of Fort Worth, Tex., is considering an early filing to preserve cash, which is dwindling because of lower bookings since the start of the war in Iraq.

Airlines around the world are cutting jobs and capacity to respond to a sharp drop in traffic since the start of the war.

Air Canada announced plans yesterday to cut about 60 maintenance jobs and about 152 management jobs at Jazz, which flies into smaller communities with smaller planes. This comes on top of 3,500 job cuts announced last week.

Other Jazz managers could be relocated, said spokeswoman Debra Williams. Earlier this month, Jazz consolidated its executive ranks to two vice-presidents from seven.

"It's an ongoing restructuring that we started a few weeks ago with the executive," Ms. Williams said. "This is another portion of that."

Separately, House of Commons transport committee chairman Joe Comuzzi has moved up the date of emergency hearings to probe whether Air Canada and other carriers need government aid. He's now planning them for next week, as early as next Thursday, instead of April 9 the following week, and they could last two days instead of one as originally planned.

He's aiming to call Transport Minister David Collenette, officials from Air Canada, WestJet Airlines Ltd., Transat A.T. Inc., Jetsgo Corp., CanJet Airlines and Canadian Auto Workers president Buzz Hargrove.

"Public insecurity about air service is the most important and critical issue that the [government] has before it and everything else can be set aside," Mr. Comuzzi said.

Mr. Comuzzi said he believes Air Canada will soon come to Ottawa with a request for assistance and he wants the committee to speak its mind first.

He said he believes any government aid extended to the struggling air industry should be doled out impartially to all carriers, not just to Air Canada.

Working against the carrier in Ottawa is resentment among cabinet ministers and MPs regarding the way the airline conducts itself. Politicians are annoyed that Air Canada said it would invoke force majeure as soon as the Iraq conflict began in an attempt to lay off unionized staff, insiders say.

"They've got quite a lot of issues working against them," said one Liberal government insider.

While Mr. Collenette refused to rule out buying shares in Air Canada as part of a last-ditch effort to help the airline, federal sources say that taking ownership of the carrier is "not a very popular idea."

[Guest neo]

A quote from that article:

"Sources said Ottawa is eyeing loans and loan guarantees as possible options to help Air Canada but at issue is whether the federal government steps in before the carrier seeks protection from creditors or after."

In otherwords, before the feds even think about loaning anything, they will hold everyone's feet to the fire. Creditors, employees, retirees, management... everyone will feel the heat. And why would they do otherwise? If they don't, Air Canada will just be a huge pit into which they throw the taxpayers' money.

And the government has ultimate leverage in this situation. If all parties don't do as they ask, then the feds let AC go bankrupt. They'll let that process force people to do as they wished, then they pick up the pieces. Or not.

So, on the one hand we have the Minister of Transport. On the other we have bankruptcy. Is this the kind of situation for which they invented the phrase, "Between a rock and a hard place"?

If it came down to me, I would negotiate before I let Mr. David Collenette or a bankruptcy court tell me what the enterprise was going to look like.

Richard Roskell

[Guest neo]

A quote from that article:

"Sources said Ottawa is eyeing loans and loan guarantees as possible options to help Air Canada but at issue is whether the federal government steps in before the carrier seeks protection from creditors or after."

In otherwords, before the feds even think about loaning anything, they will hold everyone's feet to the fire. Creditors, employees, retirees, management... everyone will feel the heat. And why would they do otherwise? If they don't, Air Canada will just be a huge pit into which they throw the taxpayers' money.

And the government has ultimate leverage in this situation. If all parties don't do as they ask, then the feds let AC go bankrupt. They'll let that process force people to do as they wished, then they pick up the pieces. Or not.

So, on the one hand we have the Minister of Transport. On the other we have bankruptcy. Is this the kind of situation for which they invented the phrase, "Between a rock and a hard place"?

If it came down to me, I would negotiate before I let Mr. David Collenette or a bankruptcy court tell me what the enterprise was going to look like.

Richard Roskell