Air Canada Jazz signals potential union deal; Caisse sells non-voting stake DAVID PADDON Canadian Press Friday, May 23, 2003 TORONTO (CP) - Air Canada's regional subsidiary, Jazz, and its labour unions signalled a potential breakthrough in cost-cutting negotiations Friday. But at the same time, a major Air Canada shareholder is bailing out: Caisse de depot announced it has sold all its non-voting shares in the insolvent airline. Few details were available immediately after the Canadian Auto Workers union announced there would be a union-management news conference Saturday in Toronto, where labour talks have been held sporadically for two weeks. "It's about labour negotiations and the future of Jazz," Gary Fane, director of the CAW's transportation division, said in a brief interview Friday night. The Jazz talks have been conducted separately from those involving the main airline. Air Canada has said it needs to cut at least $770 million in labour costs through wage and other concessions and thousands more job cuts. Two weeks ago, Justice Warren Winkler was assigned to speed up negotiations between Air Canada and its unions while it operates under bankruptcy-court protection. Justice James Farley, overseeing the company's overall restructuring, also set May 26 - this coming Monday - as a target date for an agreement. As of the end of December, Jazz had about 4,000 employees, roughly one-tenth of Air Canada's total workforce, and operated about 100 planes, mostly de Havilland turboprops as well as 20 regional jets. In addition to Jazz's management and the CAW, Fane said the Canadian Airline Dispatchers Association, the Canadian Airline Pilot Association - which operates separately from Air Canada's main pilots union - and the Teamsters union, representing Jazz flight attendants, are expected at the news conference. Earlier Friday, Air Canada's battered shares fell after a published report that unsecured creditors owed billions would be offered new stock as payment. After markets closed, Quebec's Caisse de depot pension fund announced it had sold all its 3.9 million Air Canada class-A shares - about 9.5 per cent of the outstanding non-voting shares - for less than $1.2 million. The Caisse, Canada's biggest pension fund, said it continues to hold a $150.8-million debenture. If converted into common shares, at Friday's rates, the Caisse said it would hold 10.67 per cent of Air Canada voting shares. Air Canada common stock (TSX:AC) closed at $1.72 on the Toronto Stock Exchange, down 13 cents. Its class-A non-voting shares (TSX:AC.A) closed at 34 cents, down seven cents. The Caisse said it sold 600,000 class-As for 36 cents each and 3.3 million at 29 cents. It didn't say how much it had paid for the shares or what gain or loss it had incurred. Brian Acker, president of investment firm Acker Finley Inc., said earlier Friday he's amazed investors continue to buy Air Canada stock at all, considering the shares it will likely become worthless when the airline emerges from creditor protection. "I think it's a travesty, what's going on, and the TSX should halt trading on this thing. I think there are a lot of small investors are going to be hurt," Acker said. Some of the big institutional investors also buy and sell Air Canada shares, but Acker said his concern is for small-scale investors who think "the government will come in and rescue the common stockholders." But it's more likely Air Canada's debtholders and creditors, owed $12.7 billion as of the end of 2002, will end up with an entirely new class of shares and current common stock will cease to trade one day and be worthless, he said. "Basically, you're playing financial roulette because you don't know what that day is. And no one will with certainty," Acker said. A report published Friday by the Globe and Mail, citing a document obtained after union leaders were briefed this week, said creditors would be asked to exchange $8 billion to $9 billion of unsecured debt and claims for equity. Air Canada debt securities traded at 35 to 37 cents on the dollar Friday. Aircraft lessors will also be asked for "substantially reduced rates," and other suppliers will be pressed for cheaper service and easier credit, the report said. A financial adviser to Air Canada's biggest unsecured creditors, collectively owed at least $2.5 billion, said his clients want the insolvent airline and its unions to come to terms before starting detailed negotiations over repayment. "We're patiently waiting to see what come out that," said Joseph Tucker, KPMG Financial Advisory Services, which advises a committee of unsecured and undersecured creditors including leasing companies, banks and suppliers. The message Air Canada seems to be delivering to its unions is that other people that are also going to be asked for sacrifices, but "we haven't got a formal proposal from them stating that," Tucker said. He wouldn't comment on what position would be taken by the committee of unsecured creditors, which is headed by a representative of Airbus Industries, the European aircraft maker. Meanwhile, Air Canada plans to begin a major print and Internet advertising campaign Saturday to promote its new simplified fare structure, announced Tuesday as part of its efforts to radically transform its business. Air Canada has said it needs to cut $770 million from its $3-billion annual labour bill, a major part of about $2.4 billion in cost-cutting the airline has said are necessary if it is to be a viable business. Some union leaders said this week, after a presentation by CEO Robert Milton in Toronto, the company wants to cut 7,000 to 8,000 more jobs on top of 3,600 cuts announced earlier this year. There were also reports Air Canada wants pilots and executives to take a permanent 15 per cent pay cut, while all remaining employees would face a 10 per cent reduction. *************************************************** The owner of Roger's Trinbago Site/TnTisland.com Roj (Roger James) escape email mailto:ejames@xxxxxxxxx Trinbago site: www.tntisland.com Carib Brass Ctn site www.tntisland.com/caribbeanbrassconnection/ Steel Expressions www.mts.net/~ejames/se/ Mas Site: www.tntisland.com/tntrecords/mas2003/ Site of the Week: http://www.caribbeanfloral.com TnT Webdirectory: http://search.co.tt *********************************************************