Re: Key investor exiting Air Canada rescue deal

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TORONTO - Trinity Time Investments said Friday it will not go ahead with its
proposed $650-million investment in Air Canada ? at least for the time being ?
making good on an earlier threat to walk away if unions did not agree to more
concessions.


CBC ARCHIVES: Losing Altitude: A History of Air Canada


INDEPTH: Air Canada

Trinity Time said it did not rule out getting involved in Air Canada's
restructuring in the future "if circumstances change sufficiently."

But its withdrawal raises questions about whether the airline will be able to
find another key investor in time to prevent it from being liquidated by
creditors who are owed billions of dollars.

"We are of course disappointed in this outcome," Trinity director Harold
Gordon said in a statement which released Air Canada from its exclusive
investment deal with the company. Air Canada, it said, is now free to try to
find another key equity investor.

Gordon said Air Canada's financial performance was "somewhat weaker" that
Trinity Time had expected. "In particular, labour cost and productivity
savings promised by Air Canada's unions under Air Canada's collective
agreements are not being fully achieved," he said.

AIR CANADA ANNUAL RESULTS

2003
 $1.87 billion
 LOSS
2002
 $828 million
 LOSS
2001
 $1.25 billion
 LOSS
2000
 $82 million
 LOSS
1999
 $213 million
 PROFIT

Just minutes after the Trinity Time announcement was made public, Air Canada
released its 2003 financial results. They showed that the airline had a net
loss of $1.87 billion last year. The operating loss, which excludes
reorganization and restructuring charges, was $684 million.

"Our restructuring has become more challenging as a result of record high fuel
prices, increased domestic capacity by our low cost competitors and the
geopolitical issues faced by the airline industry as a whole," Air Canada CEO
Robert Milton said in the earnings release.

But Milton said the airline was "well positioned" to carry on business while
it searches for an alternative key investor and said it was business as usual
for the airline, its customers and employees.

"We trust that our unions and other stakeholders will recognize the urgency of
resolving the remaining obstacles to our exit from CCAA [creditor
protection]," Milton said.

Trinity Time cites labour costs, high fuel prices, price competition

Trinity Time, which is headed by Hong Kong-based Victor Li, also blamed high
fuel costs for the pullout, and said yields and margins "remain under
pressure."

"Air Canada's earnings outlook is adverse to our expectations, reflecting
among other things a more intense competitive environment generally and a
higher level of domestic capacity and competition than expected."


FROM Nov. 9, 2003: Air Canada finds major investor

But Trinity's Gordon left no doubt that he felt the biggest reason why Trinity
Time was not prepared to invest its money at this time was the airline's
labour situation.

He called this week's signing of a pension deal with the machinists union "a
meaningful step" but said it wasn't enough.

"Regretfully, this step is not reflective of the positions taken by union
leaders representing more than two-thirds of Air Canada's employees," Gordon
said.

"We have concluded from this that without a change in the manner in which Air
Canada's employees are organized and their interests represented, Air Canada
will not likely achieve a sufficient fresh start to prosper and grow in the
competitive environment which it faces after emerging from CCAA [creditor]
protection."

The withdrawal of Trinity Time as the lead equity investor in Air Canada
throws a wrench into the airline's plans to emerge from creditor protection.
That protection expires April 15.

Air Canada filed for creditor protection April 1 last year.


Written by CBC News Online staff

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