Imagine that...

[Blastor]

Cash-rich Air Canada comtemplates options

Investors seek payouts, unions wants raises

By BRENT JANG

Tuesday, October 4, 2005 Page B3

TRANSPORTATION REPORTER


Air Canada's parent company is flush with cash, creating both opportunities and headaches as investors await a payout and unions push for wage increases.

Analysts said yesterday that ACE Aviation Holdings Inc. should think carefully about other possible uses for its cash hoard before resorting to a special distribution worth up to $300-million.

The sight of an airline with excess cash "seems a little strange," but Air Canada has managed to build a profitable business model since emerging from bankruptcy protection a year ago, said Steve Garmaise, an analyst with Genuity Capital Markets.

Mr. Garmaise said it's surprising to hear ACE contemplate a payout so soon, given a backdrop where the "pathetic" U.S. airline industry could lose $10-billion this year.

ACE is considering dipping into part of its $2.5-billion war chest to reward shareholders. The difficult part for ACE will be defending its plans for surplus cash while keeping unions onside with a message of fiscal restraint, analysts say.

With ACE hoping to buy new Boeing planes, reducing the pile of cash would potentially mean taking on more debt. At the end of June, ACE had $3.4-billion in long-term debt and capital lease obligations.

ACE disclosed in its management proxy circular on Friday that it will seek shareholder approval to hand out either cash or stock, amounting to $2.64 a share. ACE wants shareholders at its Nov. 10 annual meeting to support a special resolution that would grant directors the authority to approve the payout.

"Any decision to make a special distribution will be based on careful review of our financial position, liquidity requirements and other factors," ACE spokeswoman Laura Cooke cautioned yesterday.

Even if ACE receives clearance for the "tax-friendly" payout, it may refrain from making any actual distribution at the same time it sends out a "positive signal" about its bright financial prospects, Desjardins Securities analyst Nadi Tadros said.

But unions say they aren't impressed by ACE's special resolution, and vow to push for wage increases.

Air Canada agreed to re-examine wages in 2006 as part of a court-approved plan of arrangement. The collective agreements don't expire until 2009, but unions have the option next March of asking for higher wages through a process likely to lead to mediation and arbitration.

"Rather than lining the pockets of investors, ACE should give the money back to the employees who made wage concessions," said John Amato, national representative for the airline division of the Canadian Auto Workers union.

Montreal-based ACE had $2.5-billion in cash on its balance sheet in August, bolstered by a $462-million equity offering in April and the initial public offering of Aeroplan Income Fund in June. ACE received $160-million from the $287.5-million raised by selling a 14.4-per-cent stake in the loyalty program.

ACE isn't in any rush to raise more money. On Friday, it delayed plans to spin off its regional Jazz airline into an income trust, citing uncertainty in the trust market.

"ACE is cash-rich right now, but what does the picture look like later? All you need is another SARS outbreak or terrorism or hurricane to drag things down," said Paul Lefebvre, an Ontario local president for the International Association of Machinists and Aerospace Workers. "But if there is money and if Air Canada is doing well next year, that gravy should run down to the employees. Workers have already taken it on the chin."

Beats WJ profit-share and useless stocks options

[Flapsforty]

Yes. I'm sure the employee's who took haircuts and pink slips are thrilled to tears. Milton will have no trouble getting those new airplanes now, the pilots will be right on side with that.

Cheers

[Wind Ryder]

Excellent, you can cut and paste and even highlight. However its an Air Canada articule its ashame you can't read!!

[Bliss]

"beats WJ profit-share and useless stocks options"

what gives with the comments?

don't be so quick to call AC safe at home plate, it was a great sprint from third but let the dust settle and look for the ump (market/economy) to make the call over time. i.e. more than just a year.

Just rememeber how great things were in the late 90's with AC and how quickly it all turned around.

If your such an expert you'll know that nothing is for certain or safe in this industry least of which profit forcasting and expected money in YOUR pocket.

[leftyxl]

Once again we need to take pitty on poor Blastor.
He obviously didn't read the article.
It seems to me the article is talking about how Air Canada is pondering a way to distribute a well earned profit. However the unions are going to want the rollbacks they suffered back! Thus putting them back in the same un-profitable pattern they were in before, and back on an unavoidable path to CCAA

I hope they can find a fair solution to this fortunate problem.
Even if it is Air Canada competition is a good thing.

So once again we shouldn't scold poor Blastor. He was unloved as a kid and as evidence of his behavior is having a hard time dealing with his baggage.


You have my pity

[Canus Chinookus]

Guys, don't too excited; see, he's the board's 'flaming pussy-troll'. This is what he does.

[Daedalus]

So why do we continue to post in response...she only likes to read the responses to her posts.. Don't give her the satisfaction

D

[Canus Chinookus]

... still wondering why a moderator hasn't moved this pathetic attempt at a flame to the Air Canada section where it belongs...

[wsguy]

Now if Mr. Milton were to give the employees a little profit share check worth say and extra month's pay... maybe AC people can get a little of the WestJetitude.....

Now that would be fun to watch.

More koolaid for everyone!

Sorry guys .... just could not resist


(Yeah I know.... not in this life time.)

[tonysoprano]

wsguy.

See, here's the thing. WE don't need to supplement our salaries with profit sharing in the first place. But I'm not about to go THERE again. That's been beaten up on these forums too much. And how's your profit sharing doing these days? Oh, um, ya, ok, um... Someday you'll figure it all out. Westjettitude? Boy, Clive really has you brainwashed. You'd be better off with the koolaid. Trust me.

[Ryan Coke]

Ya, that system of straight salary, and the culture of entitlement, with no understanding of the connection between customer satisfaction--company performance--employee pay, has really worked well. The way you have so many employees that want to do as little as possible, because they'll still get paid, that is a great system.

It's only brainwashing if you can't understand it. Cuz why on earth would people want to do a good job for their company and its customers, and be rewarded for it, right?

You are right, it'll never work for you.

[tonysoprano]

Rye.
I didn't want to reopen that can of worms, but.
We do a good job. It's a big place, there's lots going on. Sometimes it all falls apart. There's over 20,000 employees (closer to thirty I think). Not all of them always work hard. They can get away with it. I understand your system too. It reminds me too much of my days in the small companies where we were told to be team players and someday we would be rewarded. No thanks. We can go on and on about our differences. The thing is, you are where you want to be, I am where I want to be. That's all that matters.
BTW, How IS your profit sharing these days?

[Ryan Coke]

"The thing is, you are where you want to be, I am where I want to be. That's all that matters."

Definitely agree with you on that.


"BTW, How IS your profit sharing these days?"

Great! Thanks for asking. And I hope AC continues to stay solvent this time, and is able to continue to pay everyone's salary.

[wsguy]

Things around here are a little sensitive... like hemeroids I'd say.

I still think that sharing the wealth would be a good moral booster as opposed to giving you all a hair cut and then seeing the profits role in and not offering to return some of it back to you all for your self-sacrifice.

I certainly do not think for a minute that you need to rely on a profit sharing check either to pay your bills. What I did not realise is that you were indeed so over paid in the first place and that your fellow employees would not see the benefit of getting some of that pay cut returned to them while your company is profitable. Who'd da thunk.

My thoughts are that it might make your shop a little nicer place to be if it was demonstrated that your efforts and financial sacrifices to make your company a sucess after bankruptcy were to be rewarded. Maybe it would put a little good will in the place. As opposed to having to work in a combative enviroment where there is no trust between the various unions and the company. But then I don't work there either so maybe it is a happy place to be after all... contrary to what all the striking unions in the past might lead one to believe...

As for brainwashing... well what ever my friend. You assume too much. Koolaid... naw I don't think so. I don't work for either of your companies. Just an outside perspective is all I am sharing.

Anyways, Humour was the intent of my post as well as perhaps pointing out that the sacrifices of you and your fellow employees do not as yet seem to be acknowledged in a tangible way. However an extra paycheck would be an out of character guesture that might have more support than having Celine Dion singing to you in a hanger.

Just a thought... but as I bracketed... (Not likely in this life time)

Have a great day and try to smile a little. Things tend to be taken a little too personally around here.

[tonysoprano]

wsguy.
"Anyways, Humour was the intent of my post as well as perhaps pointing out that the sacrifices of you and your fellow employees do not as yet seem to be acknowledged in a tangible way."

Well. You certainly do crack me up. On a more serious note, to reply to some of your comments, our contract is up for renewal paywise next summer and an increase in salary is expected. Our union is also trying to get some of that money for us that's kicking around. The other unions are doing the same. Milton won't just spread the wealth that easy. You say that I am so overpaid. Well my friend, I only get paid the industry standard for what I do. As for the rest of the employees at AC, you should know that there are rampies and flt attendants making more than some of the pilots. I certainly don't feel sorry for them and if you were more knowledgeable about AC, you would probably feel the same. Sometimes I think it's the lack of knowledge about each other's company that causes the problems on these forums. By the way, our shop is a nice place to work for. But again, you have to be here to realize that. One of the common BS that Clive feeds his people is that AC just isn't a nice place to work for. And things are so rosy and so much fun at WJ beacause we're all team players yadi yadi yadda. Thanks for your kind attention and have great day too.

Rye.
"Great! Thanks for asking. And I hope AC continues to stay solvent this time, and is able to continue to pay everyone's salary."
You know, that whole bankruptcy thing has kinda worn itself out. Doesn't really have that punch anymore. Can't you get a little more creative?

[rampie]

By the way, our shop is a nice place to work for. But again, you have to be here to realize that. One of the common BS that Clive feeds his people is that AC just isn't a nice place to work for. And things are so rosy and so much fun at WJ beacause we're all team players yadi yadi yadda.

Tonysoprano,
As a former AC employee, I have some perspective and an honest question for you?

Afterworking in 4 bases, I saw the same general theme. The senior management had absolutely no consideration at all for the frontline people of the company. As a manager myself, I would see everyday from my leaders that complete carelessness and inconsideration towards the frontline. And the expectation on me was to carry out the whims of the senior management without any conscience since "morale doesn't exist because you can't measure it."

Each of the stations was generally an okay place to work when the times were good, but when things started to turn south, the whole place fell apart. I still keep in close touch with a lot of my former colleagues and they tell me that the only thing that has changed is that the company is finally making some money, so people are a little relaxed, but they tell me nothing has really changed. They still distrust their managers, their managers still treat them like meat, the red vs. blue thing is still used to determine where people sit in the lunchroom and they have no tools to do their jobs (i.e. the Delta maintenance contract in YVR which from all accounts has been a continuous disaster from day one due to mis-management).

So I suppose my question is, has anything really changed at AC, or are people finally getting along despite the leadership of the company?

I sincerely hope it is or is alteast starting to change and finally be a good/enjoyable place to work. My friends deserve that, but they don't see it happening. Could it be where they work (airports & ACTS)? Are things better elsewhere?

[tonysoprano]

rampie.

AC's problems with morale come and go as does the financial health of AC. The two seem to be related. As a commuter, I get to see things from a customer point of view as well. There are times when I am appauled at the service, but most times I am quite happy. AC's history from crown corporation to the merger of two enemies (quite frankly) has an influence on some of our problems. But at the end of the day we also seem to prove that despite all that, we still have a professional, successful environment. I go to work, enjoy what I do, and by and large feel pretty good about the place. They also pay me well to do it. That doesn't mean it's perfect. Morale will get better and then it might get worse again. It is a factor of working for a major. I have been the world over and it's the same everywhere. People just love to critisize their flag carriers. To answer your question is not easy. Our management will always try to have it their way. That's why we have unions. I have only been here a few years and have noticed a real dip in morale after the merger but lately things seem to be much improved.

[rampie]

Thanks for the insight.

[Flightlevels]

Tony,not sure why you keep attacking the profit share thing....I too commuted with you to Halifax and viewed the service, had no real complaints either. Mostly the csa in YYZ pissed me off and some commuters taking advantage of the system in backdoor ways...all the usuals. Don't beat your drum too loud.lol.

[Ryan Coke]

"You know, that whole bankruptcy thing has kinda worn itself out. Doesn't really have that punch anymore. Can't you get a little more creative?"

I don't disagree that it is a little old, much like your comment of 'how's the profit share?'. But it appears you now see the pointless condescension of both comments. I hope.

[complexintentions]

Each of the stations was generally an okay place to work when the times were good, but when things started to turn south, the whole place fell apart.

Don't want to pull one comment out of a thread and lose the context...but...

I really think this sums up the situation at WestJet. Since it's inception, with the exception of the last year, "times were good" at WestJet. But with the downturns of the last few quarters, the cracks are beginning to show, and the shortcomings of a "incentive-based" system - which arguably has it's good points - will become more and more apparent. Not meant as a slam, but really, how much can "trying harder" make the company more efficient, when it's already been squeezed hard?

I know more than a few pilots who went there specifically because of the relatively quick upgrade path, for the type rating, and mainly, because no one else was hiring! Sure, it's great to has a positive work environment, but strangely, NONE of my colleagues listed that as their main reason to go there!

Myself, I'd rather take the (high) paycheque, and work on making the workplace more enjoyable - if that is indeed an issue.

If I may ask WJ'ers in the know - what exactly WAS the situation with profit-share this last quarter? My understanding was that none was paid, even though much was made in the press of the "return to profitability". And that the reason given by management was that even though the quarter was profitable, the year overall was not. With the amount of employees now, I would think Wj would have to be REALLY profitable for it to impact a T4 very much.

It's nice to hear that the PS shouldn't be regarded as part of the salary, but that doesn't mean that a lot of employees don't. There are many who follow the stock price like it's the horse races.

[tonysoprano]

Fltlevels and Rye.
Sorry for sounding condascending. The reason I bring up (as do others) the PS thing is that to me it served as a very good tool in the beginning but now WJetters might want to consider other options for a better salary. How many airline stocks do you know keep going up with time? Not many. If you are relying on that as a substantial part of your income, you are going to be in for a let-down in the near future. I won't keep bringing it up anymore, in fact I don't plan to say much anymore, but you would be foolish to accept this system as a major supplement to your bread and butter. I wish you continued success.

[Ryan Coke]

Fltlevels and Rye.
....but you would be foolish to accept this system as a major supplement to your bread and butter. I wish you continued success.

From condescending to straight up derogatory. Cool.

I view foolishness as thinking that a dysfunctional environment with a pay system that rewards mediocrity is the best system going.

Look at it this way---when things went bad at AC, the company came to your and my unions to get concessions. When things go bad at WS, our profit share suffers, and our stock doesn't appreciate. It has built in flex, but has similar results to what AC had.

The difference, is that we are constantly motivated for our company to do better, because we see the payoff very directly. Understand, that it really doesn't affect me, because I was always motivated to make things better when I was a part of the red team too, but it was the fact that I saw so much attitude of entitlement around me, that reduced the ability of the company to survive the difficult times, and become profitable. That group of employees cost alot of people their jobs, for quite a while, and came close to helping the whole thing collapse.

Let me make it clear, there are lots of great people who do a damn fine job there. But it wasn't a pervading sense of understanding that the passenger having a good experience, the company doing well, did benefit the individual. Too many people do the minimum, and try to get the maximum, regardless of the fundamental costs that they don't understand.

Now, to be brutally honest, I want a $200 000+/yr guaranteed salary, plus the other 3 risk based compensation programs we currently get. But I still got paid more in my first year at WS (even with all the poor PS and stock performance), than I did after 5 years at Jazz. If you feel the pay is so poor, then perhaps you should attempt to get your fellow ACE pilots wages up, instead of waging a destructive war of perceived superiority and ego that hurts all ACE flight crew.

Anyway, you would be foolish to dismiss premise of the pay package. It could be higher, and we'll see where it goes in the future. Up to this point, it has made many millionaires, but how it works may have to be adjusted as time goes by.

[Jaques Strappe]

As an AC employee, I think the shareholders took a pretty bad haircut as well, so giving some back is not a bad thing.

I for one, would be favorable to a "performance" based pay system at AC. Get rid of all the dead beats who think they should be getting pilot wages.

[Flightlevels]

I for one only use profit share for a bonus only. Everyones financial position is different. This quarter will be good again. If you think about it the last few months have been pretty positive around here.... 12 more airplanes in 2006, return to profits, hiring again, upgrades new res system, etops, new routes expanded contract with transat etc....not really anything to gripe about and most importantly still have solid job security, good guys to work with and making good money. Funny how some determined we are on the slide. simply not true.