Guest GDR Posted July 4, 2003 Share Posted July 4, 2003 Air Canada poised for strong investor interest after restructuring: analyst STEVE ERWIN AND DAVID PADDON Canadian Press Friday, July 04, 2003 CREDIT: (CP/Frank Gunn) Air Canada passengers line up to check in at Pearson International Airport in Toronto in April. (CP/Frank Gunn) ADVERTISEMENT TORONTO (CP) - Air Canada's deal to secure new loans and cheaper aircraft leases from its biggest lender upon its eventual emergence from bankruptcy restructuring should make it easier for the insolvent carrier to cut costs with other creditors, analysts said Friday. The conditional exit financing and cost-cutting deal worth $1.8 billion, announced late Thursday, should also help persuade suppliers to continue with Canada's dominant airline after its restructuring later this year, and attract a host of new investors to the company. "People realize that Air Canada coming out of bankruptcy is going to be a strong play" on the markets, airline analyst Sam Barone said of the new financing deal. "Air Canada is still going to be a dominant Canadian carrier and of course is going to be Canada's largest international carrier, not only by default but also by tradition," he said, adding that after restructuring, Air Canada will emerge as "very much a low-cost carrier. "It won't be 'the' low-cost carrier, but it will be a lower cost carrier," he said. GE Capital Aviation Services has tentatively agreed to provide nearly $1.3 billion to finance up to 43 regional aircraft that Air Canada hopes to buy in coming years once it emerges from court-protection from creditors. The GE Capital unit has also agreed to provide $575 million in new debt to be used for general corporate purposes to improve Air Canada's cash position after it lifts itself out of restructuring. Additionally, the GE deal will offer much better terms for the lease payments the airline pays for its aircraft. GE is Air Canada's biggest aircraft lessor, and its tentative deal should help the airline convince other lessors to offer similar cost reductions, Barone predicted. Air Canada has said it is seeking to chop in half the $1.4 billion it spends on aircraft leases each year. New arrangements still need to be reached with other aircraft lessors and other unpaid creditors by July 31. "It will set the bar, essentially. It's a precedent, no doubt," Barone said. "General Electric is the largest of these leasing companies that Air Canada is dealing with, and so the remaining lessors really, in terms of these aircraft, basically are going to look at that and they're going to see that . . . they're not going to be able to play as much hardball as perhaps previously thought. "In other words, 'If you want this business, we need this cost level in order to business with you'," Barone said of the likely tone of negotiations. Air Canada, which expects to file a restructuring plan with the Ontario Superior Court of Justice this fall, is seeking $1.35 billion in debt and equity financing once it emerges from court protection. The agreement with GE Capital Aviation Services provides "an important portion" of that financing, it said Thursday. The GE financing deal follows deals reached last month with unions to trim its annual $3-billion labour bill by $1.1 billion. Some labour leaders were upset, however, with reports that pay cuts for Air Canada executives will be smaller than originally proposed. Most executive salaries are being cut by 10 per cent, while the airline's pilots are taking 15 per cent pay cuts. Air Canada CEO Robert Milton, however, is said to be taking a 15 per cent pay cut. He earned $1.1 million last year. One report quoted a labour leader as suggesting the executive pay cuts were a "flip-flop" of previous discussions with the company. However, Air Canada spokeswoman Laura Cooke said executives, as well as the airline's unions, were asked to reach certain cost-reduction targets and that if productivity measures were improved to a certain level, they could reduce potential pay cuts. "Each group had the opportunity to reduce the level of proposed pay reductions," Cooke said. "Ultimately, all the groups, including management, met their respective cost reductions." It's too early to tell what Air Canada's ownership structure would look like after restructuring. There were reports Friday that Cerberus Capital Management LP, a New York-based firm that invests in distressed companies, has been acquiring a stake in the Montreal-based airline. Cerberus managing director Kevin Genda did not respond to requests for comment on Friday, a holiday in the United States. There have been reports other companies are also interested in stakes in a restructured Air Canada or in its subsidiaries. "Not only these vulture funds, but a lot of institutional investors also will be looking at the airline as a purchase for their portfolios," Barone said, adding that there are investor groups interested in cashing in on so-called "distress debt situations." While Barone anticipates blocks of investors having interests in Air Canada, he noted that foreign ownership in the airline, by law, is limited to 25 per cent. In Ottawa, Transport Minister David Collenette would not comment about potential aid for the airline industry weakened by geopolitical events and downtrodden economies. He was optimistic, however, about Air Canada's chances for future success. "Out of this process, Air Canada will emerge as a healthier, vital airline and I think that's in the country's best interest," Collenette said, adding that he is "pleased" with the way the restructuring is proceeding. Also pleased with Air Canada's progress were investors, who lifted the company's stock (TSX:AC) 20 cents - or 12.5 per cent - higher to $1.80 in trading of more than eight million shares on the Toronto stock market Friday. That's despite expectations the airline will convert about $4.3 billion worth of unsecured debt into new equity after it restructures, rendering current shares worthless. "Some of these (investors), it would seem to me, are going to get a sharp awakening somewhere down the road," said Fred Ketchen, Scotia Capital's chief equities trader. Link to comment Share on other sites More sharing options...
Financial Guy Posted July 5, 2003 Share Posted July 5, 2003 It appears Jeff Immelt has a strong belief in the future of Air Canada - no doubt he's also wiped some of the smirk off Clive's face in the process. Link to comment Share on other sites More sharing options...
Guest Max Continuous Posted July 5, 2003 Share Posted July 5, 2003 Is there some significance to this interview scheduled for Monday morning? Hoping it's positive news. ROBTV 6:50 AM EDT Air Canada Martin Rabinovitch, Insolvency Lawyer & Partner, Lang Michener. Link to comment Share on other sites More sharing options...
Maverick Posted July 5, 2003 Share Posted July 5, 2003 Je$us, you get what should be good news and the first place you look is for someone to kick. Get a life and focus on your own company instead of trying to ruin another, this is the attitude that got you where you are now. Link to comment Share on other sites More sharing options...
Maverick Posted July 5, 2003 Share Posted July 5, 2003 Sheesh, AC gets a bit of good news and your first thought is how it will negatively affect another. Here's a thought, maybe now the skies are clearing and everyone can do well? Maybe? Naw, you better go try to kick that pesky dog first. Link to comment Share on other sites More sharing options...
Sky High Posted July 5, 2003 Share Posted July 5, 2003 I very much doubt Clive is all too worried at this point in time. AC still has a long way to go and they ain't out of the woods yet. Believe me, Clive isn't losing any sleep over it. Link to comment Share on other sites More sharing options...
Guest saymach# Posted July 5, 2003 Share Posted July 5, 2003 Well, I think you better get used to it. There is no ill will towards any employee at WJ, but there are alot of people at AC who would like to wipe that arrogant smirk of Clyde's face, based on his big mouth remarks earlier this year. Link to comment Share on other sites More sharing options...
dr1 Posted July 5, 2003 Share Posted July 5, 2003 Uh huh…so your anti-WestJet crusade is based on some perceived slight, some utterance from Clive. What exactly did he say that has got your panties in such a knot? Link to comment Share on other sites More sharing options...
Guest leftbase Posted July 5, 2003 Share Posted July 5, 2003 No kidding eh?! If we're comparing antipathy towards Clive v. Milton and AC as a whole...I think good ol' teal-tail would come out just fine. Once again, it's always us against them. Sorta like my kids playing Red Rover in the playground...guess what, we ALL just fly/fix/service airplanes...ZZZzzzzz.. Link to comment Share on other sites More sharing options...
wjaer Posted July 5, 2003 Share Posted July 5, 2003 Saymach is mad cuz we didn't bring him back after the group interview... Link to comment Share on other sites More sharing options...
dragon Posted July 5, 2003 Share Posted July 5, 2003 I agree with your comment about Westjet employees. As for Clive, I could care less about his grin. I just want to see a healthy AC and a healthy WJA as well, too many good guys over there to worry about Clive's grin. cheers dragon [original red and still happy to be AC] Link to comment Share on other sites More sharing options...
Guest GDR Posted July 5, 2003 Share Posted July 5, 2003 The vast majority of us original red and still glad to be AC types agree with you completely dragon. Greg Link to comment Share on other sites More sharing options...
dragon Posted July 5, 2003 Share Posted July 5, 2003 Thats my feeling as well Greg. Nice coming from you. Have a great weekend. dragon Link to comment Share on other sites More sharing options...
Guest saymach# Posted July 5, 2003 Share Posted July 5, 2003 Nice Try; Never been there, never done that. Would not have been able to afford the pay cut. As I said, no ill towards anybody there, none whatsoever, and believe me I know enough of you there. By the way when are the VNAV approaches gonna start for the -700 ?? Seems a shame that you havent been able to take advantage of that great feature. Also while I seem to have garnered everyones attention, what besides paperwork would it take to certify the -700 as an ETOPS machine Link to comment Share on other sites More sharing options...
Mitch Cronin Posted July 5, 2003 Share Posted July 5, 2003 "Original red" or not, I'd guess that feeling is shared by many. I have a suspicion that differentiating between original red and not is almost akin to some kind of racism... Not nearly as harmful no doubt, but perhaps just as divisive, in it's own way. Certainly in the context of wishing those from WJ the best of luck it has little value... wouldn't you agree? Link to comment Share on other sites More sharing options...
Guest GDR Posted July 5, 2003 Share Posted July 5, 2003 Absolutely correct Mitch. I think sometimes we (OAC pilots that is),get feeling a little defensive on this forum. Greg Link to comment Share on other sites More sharing options...
dragon Posted July 6, 2003 Share Posted July 6, 2003 Heh Mitch, First off, I’m not the sharpest knife in the drawer. I remember a time when what sticker you had on your flight bag [ Canadian, ACPA, Transair etc] was all the rage . . . personally, I never got it. Second, you know me well enough to know that any negative or divisive slant, was not my intent. Finally, your probably right, so; ”I agree with your comment about Westjet employees. As for Clive, I could care less about his grin. I just want to see a healthy AC and a healthy WJA as well, too many good guys over there to worry about Clive's grin. cheers dragon [happy to be AC, surrounded by great people whos varied backgrounds assure the diversity and culture of our great organization. . ]” Link to comment Share on other sites More sharing options...
Guest jazzplayer Posted July 6, 2003 Share Posted July 6, 2003 How do you know? Do you sleep with him? Link to comment Share on other sites More sharing options...
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