From: evan@telly.on.ca (Evan Leibovitch)
Subject: Re: Bou Bou made a boo boo (staying away from talks)
Organization: Somewhere just far enough out of Toronto
Date: Thu, 13 Aug 1992 15:42:26 GMT
Keywords: Canada, Constitution, Quebec, Bourassa, Seperation, Distinct Society

In article <1992Aug12.034531.7473@oneb.almanac.bc.ca>
	kmcvay@oneb.almanac.bc.ca (Ken Mcvay) writes:

>The question raised is this: where is the financial viability of a deal
>between two essentially bankrupt airlines, as opposed to (1) minority
>participation by American Airlines (note - not a takeover) or (2) an
>employee participation program to keep Canadair in Western Canada. 
                                        ^^^^^^^^
					I assume you mean PWA.
					Canadiar is a totally different
					company (makes Challenger jets).

OK. A little light on the situation, coming from a client which happens
to be a trade union with the bulk of its membership working at AirCanada
and PWA. They've been heavily involved in the goings-on, as they have an
(understandable) major stake in the results.

Air Canada may be losing more money than PWA, but it has more than $1billion
in cash and far less debt. With airline revenues not looking to increase for
two years, the question is "which airline(s) can survive until then". Based
on assets and current debt, Air Canada is in a far better position to survive.

The American Airlines offer was nothing less than an attempt at
dismemberment of Canadi>n at a fire sale price. American is not
interested in serving Canada, they were more interested in Canadi>n's
Asian routes. Air Canada is not currently permitted to serve across
the Pacific, for Canadi>n these routes are the most profitable part of
its operation.

The American plan would have required taxpayer subsidy, and would have
lost far more western jobs than the current AC/PWA buyout plans.
For the longest time, the news was that American just wanted a small
piece of PWA, to co-ordinate routes and streamline some services. Then
they *really* laid their cards on the table and it stank something awful.
Nobody in the Canadian air industry seems to be complaining that this
deal fell through.

The "employee share" plans, in which the employees of Canadi>n are being
asked to buy about 20% of the company to give it some cash, is being
looked at seriously but skeptically. It's a plan which was created by
PWA's middle management, which has the most to lose in case of an Air
Canada buyout. The unions have asked "if the employees are asked to put
their money where their mouths are, will management take pay cuts as
well?", and have been given a lukewarm response. The unions are not sure
that this short-term injection of cash is enough to keep the airline
vialble in the long term. However, the treasurer of Alberta has also
offered up some Heritage Fund money, so this option may be workable.

The biggest fears the unions have is in NAFTA, and the open skies policy
which the Tories are committed to. No matter what happens with Air
Canada and Canadi>n, they will soon have to deal with competition from
foreign airlines on Canadian domestic routes. One of the more logical
solutions would seem to be a single strong Canadian carrier which could
compete continent-wide on the same scale as the US biggies.

A combined Air Canada and Canadi>n would be the fifth or sixth largest
air carrier in North America.

It is widely thought that *if* an Air Canada/Canadi>n deal goes through,
that the next step would be for it to make a fire-sale offer for either
Continental or TWA, both of which are in *big* trouble (bigger than PWA)
on the other side of the border. This would make the combined Canadian
airline even better able to cope with the inevitable coming competition.

>According to the union spokesmen out here, and CKNW's financial guru, who
>also appears regularly on CTV-TV, Air Canada's books are in far worse shape
>than Canadair's, which again raises the same question: why Air Canada, a
>loser, and why now, when Bourassa is once again bellowing the Call Quebec,
>"More, More, More?"

There are enough real issues over which to criticize Quebec. This is not
one of them.
-- 
 Evan Leibovitch, Sound Software Ltd., located in beautiful Brampton, Ontario
         evan@telly.on.ca / uunet!utzoo!telly!evan / (416) 452-0504
    Was "Trouble" (from the Broadway Show, Music Man) the first rap song?
Newsgroups: can.politics