They will be coming for concessions from all employees in order to maintain their bonuses.
http://business.financialpost.com/2012/ ... the-works/
Chorus Aviation dividend cut may be in the works
Investors in Chorus Aviation Inc. are being warned Wednesday of a possible dividend cut after an arbitrator sided with Air Canada in the companies’ ongoing rate dispute.
Details of the decision are still unclear. But Chorus issued a statement Wednesday saying the arbitrator had sided with Air Canada in the dispute. Although, it also noted other cost adjustments are going to made in Chorus’ favour.
Debra Williams, Chorus spokeswoman, said the decision is “very complicated” and that the company is still reviewing it and seeking further clarity from the arbitrator.
“We’re unable at this time to provide a comprehensive overview of the result with any certainty,” she said in an email. “However, we can confirm that Air Canada will not receive its full claim in the arbitration. We will provide an update as soon as possible.”
At issue is how much Air Canada pays Chorus through their long-standing relationship that sees the regional carrier fly on the mainline’s behalf.
Under the terms of their partnership, Air Canada covers certain uncontrollable costs at Chorus, like fuel. But it also pays a mark-up on any remaining controllable costs, like wages.
Chorus is currently paid a mark-up of 12.5% of its controllable costs, meaning for every $1 in controllable costs Air Canada pays Chorus $1 plus 12.5¢.
But to ensure Chorus keeps its costs in check, both parties agreed to review the rate of the mark-up in 2009 and 2015 by comparing the increase in Chorus’ costs to those of its regional peers in the U.S. If Chorus’ costs outpace those of its regional peers, the mark-up rate for Air Canada is reduced.
The companies have been locked in a dispute over methodology to determine the rate, retroactive to 2010. Air Canada wanted to adopt a different methodology, which it says would reduce the markup rate to 9.48%, while Chorus said it wants to use the industry standard measure of unit costs, which would keep the rate at 12.5%.
While the outcome of the decision is unclear at this time, Cameron Doerksen, National Bank Financial analyst, said it appears to be a negative for Chorus and may result in a cut to its dividend.
“The arbitration panel did not award Air Canada its full claim and there may be some changes on controllable cost adjustments in Chorus’s favor so the impact will be something better than the worst case scenario,” he said.
While it’s hard to understand the impact at this point, he noted that under the worst-case scenario where Air Canada won outright, Chorus would have to pay nearly $50-million in retroactive payments to Air Canada.
It would also be on the hook for roughly $15-million to $20-million so far this year.
Mr. Doerksen noted that at the end of the second quarter, Chorus had $91.7-million in cash on hand, so it has enough on hand to meet those obligations.
But given its lower cash flow and other capital requirements, he said he would expect a dividend cut in the range of 25% to 35% from 60¢ a share annually today.
At the same time, he noted that under the worst-case scenario his valuation for Chorus would be shaved by 30%. He has $3.50 a share price target on it.
“Given that the financial impact will not be as severe as the worst-case, we do not expect to reduce our target by that magnitude. Nevertheless, our valuation will be reduced and we await further details from Chorus before fully assessing the financial impact,” he said in a note to clients.
I sure hope so.
you guys are the reason why pilots are weak. One announcement where Jazz doesn't get the work and "Jazz is finished". Did you really think JZA would get it all? SR gets 15 EMB for 3 years and Jazz is done? 
