Air Canada Provides Update on Restructuring
MONTREAL, June 19 /CNW Telbec/ - Air Canada today provided the following
update on the airline's restructuring under the Companies' Creditors
Arrangement Act.
Process to Raise Equity for Exit Financing to Commence
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As reported in the Monitor's Seventh Report filed with the Court today,
Air Canada has now developed the framework of its financial restructuring
plan. The key components of the preliminary plan include:
- Raising $1.35 billion in new equity and debt capital for exit
financing. The Company is in the process, in consultation with the
Monitor, of developing a competitive process that will facilitate
potential investors submitting expressions of interest to provide new
equity to a restructured Air Canada;
- Raising financing to obtain new 55 to 110-seat aircraft in future
years at an estimated capital cost of over $4 billion; and
- Converting the existing unsecured debt into equity of the restructured
Air Canada.
As a result, it is highly likely that there will not be any meaningful
recovery to existing equity of the Company.
Onex/Aeroplan Negotiations and Exclusivity
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The Company has decided to combine the process of seeking a partnership
investment in Aeroplan with a process to raise debt and equity exit financing
for Air Canada. The stand-alone negotiations with Onex relating to Aeroplan
will become non-exclusive June 23, 2003. "We welcome the continued
participation of Onex in the new equity investment process for Aeroplan," said
Calin Rovinescu, Chief Restructuring Officer.
Labour Ratification Process
---------------------------
Air Canada has concluded tentative agreements with all nine of its
domestic unions. To date, the CAW Airline Division representing 6,000 customer
sales and service agents and crew schedulers and CALDA representing 100 flight
dispatchers at the mainline carrier have ratified their contracts.
Ratification is in process with ACPA, representing the 3,150 mainline pilots,
CUPE representing 6,700 flight attendants and the IAMAW representing 11,000
technical operations and airport ground service personnel. At Air Canada Jazz,
ALPA, CAW, and CALDA have ratified their contracts and the ratification
process is underway with the Teamsters. The ratification process is expected
to be finalized by June 30, 2003 with all unions.
Upon ratification of these agreements, the airline will achieve an
overall cost saving of $1.1 billion annually on a consolidated basis. Air
Canada is currently in discussions with its unions outside Canada and expects
that these negotiations will be concluded by June 30, 2003.
The Company will not access the funds received from the CIBC facility nor
draw down on the debtor-in-possession (DIP) Facility provided by General
Electric Capital Canada Inc. unless the labour agreements are ratified by the
unions.
Negotiations with Aircraft Lessors
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At a meeting convened in New York May 29, 2003, the Company provided its
aircraft lessors with background information on the Company's financial
position, future competitive landscape for Air Canada and the industry, fleet
reconfiguration plans as well as concessions required from aircraft lessors.
Prior and subsequent to the New York meeting, Air Canada met with
substantially all of its aircraft lessors individually to negotiate lease
revisions. It is Air Canada's intention to return aircraft to lessors unable
or unwilling to renegotiate their lease arrangements. Air Canada is seeking a
reduction in annual aircraft lease costs of approximately $720 million from
current levels of approximately $1.4 billion.
Request For an Extension to the Stay Proceedings
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Air Canada will request an extension to the stay period order to
September 30, 2003. The purpose of this extension is to complete the Company's
revised business plan, renegotiate the terms of aircraft leases with lessors,
complete the review and renegotiation of operating contracts and commence the
process to raise approximately $1.35 billion of exit financing.
"We have made substantial progress in the first ten weeks of a very
complex restructuring and although there are still formidable challenges
ahead, the groundwork established so far has moved us closer to our objective
of restructuring Air Canada into a stronger airline well positioned to compete
profitably in the new airline environment," said Mr. Rovinescu.
Financial Information in Monitor's Report
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Since the Company filed under the CCAA on April 1,2003, revenues for the
two months ended May 31, 2003 are approximately $1.2666 billion, a reduction
of $384 million or 23.3% from the same period in 2002.
Additional information on developments in the restructuring process,
including details of the Company current cash position as well as previously
disclosed information relating to the Company's financial position is
contained in the Monitor's Seventh Report filed with the Court today and
available online at aircanada.com by clicking on 'Air Canada Restructures'.
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