Air Canada parking 155 aircraft!!

[Stinky]

Yeah, I doubt it too. But this guy thinks its a good idea.


http://www.thestar.com/business/article/612858

[bmc]

How many should they park?

[Lost in Saigon]

Jacques Kavafian has been shown to be a complete idiot, time and time again.

Air Canada can't park so many aircraft because there are all sorts of fixed costs that can not be avoided.

One example of fixed costs is the cost of training pilots. You just can't park a bunch of domestic EMB's and A319/320/321's while continuing to fly widebody's overseas. Even if you were to lay off half the pilots.

The problem is that many of the domestic pilots are senior to the overseas pilots. If you park a domestic pilot's aircraft, he will need to be trained to fly the widebody's. And that displaced junior widebody pilot will probably be needed to be retrained to fly the domestic aircraft.

Does Jacques Kavafian have any idea what it costs, and how long it takes to train a pilot on a new piece of equipment?

[kevinsky18]

ya parked planes still cost. Lease payments and insurance still need to be paid.

[Glen Quagmire]

The Jazz fleet is included in those numbers, AC doesn't have 300+ aircraft. A ridiculous idea. How about starting by paying industry standard rates for things like regional feed, maintenance, and ground handling and dismantling the maximum value ponzi scheme that Milton setup when he spun off the assets with AC liquidity funding the whole scam.

[Old fella]

These various analyists give opinions
opinions are like assholes
we all have one!!


It's like those instant aviation experts who rise to the occasion to comment after an aviation disaster. They all strive to seek their 1 - 2 minute exposure in the national media limelight.

Right! Air Canada is gonna park 155 airplanes and from that start up the following week as Air Canada 2009 Inc.

[Brick Head]

The Jazz fleet is included in those numbers, AC doesn't have 300+ aircraft. A ridiculous idea. How about starting by paying industry standard rates for things like regional feed, maintenance, and ground handling and dismantling the maximum value ponzi scheme that Milton setup when he spun off the assets with AC liquidity funding the whole scam.

Very astute Mr. Quagmire.

This guy is a restructuring guy. A very heavy handed restructuring guy. He will want to do it outside of CCAA however, otherwise ACE's 75% stake in AC is lost. The goal will be to make it through this recession so that AC can be sold for more profit out the other side. Yeah that's right. I said it. more.

But there is a lot more to restructure than just finances at AC. Pension/debt/ cash balance.

And who better to undo the structure than the guy who put it together?

Is no one in gov't paying attention?

Calin- 2000 EVP of corporate strategy. job description- Put AC and Canadian together.

Calin- 2003 Head of restructuring- Job description - rip apart into separate entities that which he just put together. Decapitalization of AC. Sell those entities for cash. Maximizing the sale of those units with inflated contracts imposed on AC. All done through ACE the holding company.

Calin- 2009 CEO of AC- Job description- Salvage AC from its decapitalization and inflated service contracts because ACE failed to unload AC in time. IOW kick the investors who bought into their former spun off units squarely in the teeth. But what does ACE care? They don't own them anymore.

Everyone is a target.

The employees. The pensions. The gov't on pension reform. The suppliers. The lease holders. The service providers.

But it is all OK. What has ACE got so far? Over 3 billion? And more to come if they manage to kick all the other stakeholders in the teeth.

Everything he does from this moment forward will be about maximizing the sale of AC for ACE shareholders. That is why he is here.

[aroundthewing]

The Jazz fleet is included in those numbers, AC doesn't have 300+ aircraft. A ridiculous idea. How about starting by paying industry standard rates for things like regional feed, maintenance, and ground handling and dismantling the maximum value ponzi scheme that Milton setup when he spun off the assets with AC liquidity funding the whole scam.

You mean lower??

[whiteguy]

Park 155 airplanes? Leaves AC with 46 planes in their fleet!

[Brick Head]

Park 155 airplanes? Leaves AC with 46 planes in their fleet!

The article is quoting pieces of what Kavorkian had to say. The original comments refer to AC's fleet including the CPA fleet. FWIW (his comments are not worth much) he suggested most of that number come out of the aircraft operating under the CPA.

The thought process is way too over simplified. If you read his comments they are based solely on all none profitable routes getting the axe. AC is paying Jazz the equivalent of about 26cents/asm for the CPA. What do you think the chances are that AC is getting 26cents/asm revenue in return? So it is natural that those routes and aircraft all show loss. As a matter of fact it is a given.

However what would the profitability of those routes be if AC were paying a North American industry standard CPA rate of about 15cents/asm? He doesn't answer that question. He doesn't even ask it. However other anylists at Research capital do seem to be slowly getting the picture.

AC can't afford the CPA.

Sorry don't have access to the whole article

Jazz Air Income Fund, operator of the regional airline Jazz Air LP, slumped the most among all 209 S&P/TSX stocks. Research Capital Corp. said in a note that Air Canada, the country’s largest carrier, should scrap its agreement with Jazz to survive the recession that has crimped air-travel spending. Jazz shares tumbled 14 percent to C$2.30, the lowest since the company’s January 2006 initial public offering.

[Jaques Strappe]

I have to admit, the title of this thread caught my attention until I saw it was another half baked comment from Kavafian. This guy is a real piece of work and I am amazed that he still has any clients. After all these years, he has been so far off the mark way too often to have any real credibility.


Brick Head

Do you really think they will go after the CPA? I mean these idiots created it, would going after it not be admitting they were wrong in the first place? I don't think humble pie is ever on the executive lunch menu.

[rudder]

Do you really think they will go after the CPA? I mean these idiots created it, would going after it not be admitting they were wrong in the first place? I don't think humble pie is ever on the executive lunch menu.

One analyst summed it up - without any requirement for relief from the existing terms of the CPA, AC could roll back Jazz block hours by 10%. So what did they do for the summer? Increased Jazz block hours.

So it would seem that as far as AC is concerned, Jazz is not the problem. Having said that, there are 'interest based' changes to the current CPA which could be seen to benefit both parties.

[swervin]

CCAA.pdf

(622.63 KiB) Downloaded 162 times

According to the report from CIBC world markets, Jazz's costs are in line with all the US CPA providers. Here's the document.

[Brick Head]

CCAA.pdf

Jazz's costs are in line with all the US CPA providers. Here's the document.

Are you sure that is what CIBC is saying? Quite frankly I can't tell what they are trying say below.

Jazz employees are cheaper yes. Ac could not do the flying cheaper itself agreed. But the CPA rate that AC pays is typical of what US regionals get? Don't think so. The rate, all in, far exceeds anything any US regionals get. 26cents/asm versus 15cents is in line?


Jazz Air Income Fund
Jazz (JAZ.UN-SO) provides regional services for Air Canada. In a CCAA filing, the key document governing the two companies’ relationship, the Capacity Purchase Agreement (CPA), is subject to opening and negotiation. However, we believe a bankruptcy court would have to find the contract well offside in terms of market rates for operations and we believe Jazz provides service to Air Canada at rates comparable to any of the U.S. regionals and typically exceeds them.


The benchmarking process was not a direct cost comparison of Jazz to US CPA providers. It was a comparison of change in costs only.

[Black Cat]

Thanks for that swervin!

[Brick Head]

Double post

[Brick Head]

One analyst summed it up - without any requirement for relief from the existing terms of the CPA, AC could roll back Jazz block hours by 10%. So what did they do for the summer? Increased Jazz block hours.

The ACPA collective agreement, in its present form, does not permit any tier two flying at any other company than Jazz. AC, at the moment, has no choice in who they use if they decide a tier two aircraft should be on the route.

[teacher]

Jazz does get paid more yes but than is locked into contracts with other parts AC like ACGHS for one and pays more for that. It's a fancy money laundering scheme.

This topic of the CPA etc has been beat'n way to much on this board to go into again.

[Brick Head]

Brick Head

Do you really think they will go after the CPA? I mean these idiots created it, would going after it not be admitting they were wrong in the first place? I don't think humble pie is ever on the executive lunch menu.

This is a business strategist. The plan made lots of money for ACE. All value has been extracted. Looks like a job well done to me. I would say that is why he is back. Are you sure he will be embarrassed that he got investors to pay an inflated price while monitizing former AC assets? Do you think he cares about something he doesn't own any longer?

The question is really can he do anything about the CPA? Legally I would say no. But this guy put the CPA together and has a rep of just doing things anyway. He mops up on the subsequent clean up.

His job will be one thing and one thing only. Salvage AC's corpse and create value so ACE can sell it later on. He cares about nothing else. He will create value for AC at any opportunity that comes his way. The ACE BOD has obviously decided a confrontation approach is the way to achieve this. That includes us of course.

[tonysoprano]

Yesterday's Financial Post ran an article which quoted mr. kafavian as saying AC mainline "could" park as many as 37 airplanes. The 330-something is a total of both AC and Jazz. Still doesn't add up cause if they park 37 at mainline, does that mean the rest (155-37=128) come from Jazz? I don't think so. These guys can make your head spin. Reporters and airline "experts" are so wound up right now they can't get get their brains around fact from fiction. One thing they did seem to be clear on is that Calin Rovane-screw-u is reviewing the CPA with Jazz and it could well be gone long before 2011. The only way he can do this legally is by going into CCAA.

[Stinky]

I sure as hell hope they don't compare U.S. regionals to Jazz, do we really want to start paying F/O's 19K a year. The U.S. system is the problem, not us.

I'm sick of these executives slashing wages as a means to cut costs and get themselves fat bonuses. Look at GM. We're all going to be slaves as the rich get richer.

Capitalism doesn't work. We need a nice healthy communist regime.

[Jaques Strappe]

Brick Head wrote:

His job will be one thing and one thing only. Salvage AC's corpse and create value so ACE can sell it later on. He cares about nothing else. He will create value for AC at any opportunity that comes his way. The ACE BOD has obviously decided a confrontation approach is the way to achieve this. That includes us of course.

I would have to agree with you 100% on that. Which means that if he pulls it off and we end up with another " American management style " executive, we will be back here doing this all over again in another few years.

[Localizer]

I really think some of you guys are on glue or maybe a strong narcotic. If you think Jazz is just going to fade off in the distance, to become nothing more than a second in the spectrum ... you are wrong. They are here for the long haul.

Personally I think the only report closest to the truth would be the CIBC World Market report. Not every "Joe" who calls himself an aviation expert.

Just a couple paragraphs from there report ...

In a CCAA filing, Jazz faces the prospect of the CPA reopening, however,
given the substantial amount of capacity and other services Jazz provides,
we do not believe it could be replaced. We expect Jazz would be open to
discussions including financial support to avoid a filing.

Or this paragraph ...

Jazz (JAZ.UN-SO) provides regional services for Air Canada. In a CCAA filing, the
key document governing the two companies’ relationship, the Capacity Purchase
Agreement (CPA), is subject to opening and negotiation. However, we believe a
bankruptcy court would have to find the contract well offside in terms of market
rates for operations and we believe Jazz provides service to Air Canada at rates
comparable to any of the U.S. regionals and typically exceeds them. Part of the
2010 rate reset process for the CPA already includes a benchmarking process on
cost to U.S. regional carriers.

Or this paragraph ...

The scale of services that Jazz provides Air Canada should also not be
underestimated. Jazz provides airport operations for all Air Canada destinations
in Canada other than the largest eight airports and provides service to 86 of 115
North American destinations. We believe the scope of the operation would make
it very difficult, if not impossible, to take over completely. As well, there is no
other entity in Canada with sufficient resources to operate 133 aircraft covered
under the CPA. Installing a transplant airline from U.S. regional airlines is a
possibility but it would certainly take time leading to severe disruption to
service, which we expect the government would not tolerate for long. We expect
Air Canada would not be able to reduce expenses materially in this scenario.

Or the paragraph that should make your forehead a little warm ...

One option for Air Canada in a CCAA filing could be to modify the existing scope
clause with its unions. The current scope clause limits the size, number and type
of aircraft and capacity Air Canada is allowed to contract to Jazz. Jazz has lower
labor costs and more flexible work rules than Air Canada. If the CPA was
terminated, we do not believe Air Canada would find it more cost effective to
internalize the operation.

I'm sure with the present recession paint shops are looking for work ... How long do you think it takes to paint an Embraer?

[scopiton]

I would have to agree with you 100% on that. Which means that if he pulls it off and we end up with another " American management style " executive, we will be back here doing this all over again in another few years.

would a strike a way to say NO to the new Management Style ?

Is lufthansa a serious bidder on AC ? a european mamangement would be much better and constructive.

[cat3]

Lufthansa to save the day, eh? And you guys talk about the C-series as if it were actually going to mainline. Lufthansa bought the C for a Swiss regional carrier it owns. If they actually were intersested in AC they would probably humble you even more than the new guy is about to.

Jazz will emerge with more flying from all this. As someone else mentioned, block hours are INCREASING at Jazz at a time when mainline is suffering (exactly because they saw the losses coming before they assigned the block hours to Jazz. AC was VERY late in providing the block hours to Jazz this time around). This alone is says quite a lot about the ineffective EMB ops AC runs.