Aveos layoffs could cause flight cancellations
Published Monday, March 19, 2012 8:51PM EDT
Last Updated Saturday, May 19, 2012 7:47AM EDT
Air Canada said Monday it could be forced to cancel flights and strand thousands of passengers if the maintenance company that obtained creditor protection Monday is unable to complete repairs to several planes.
Monday night, in an apparent bid to avoid any air disruptions, Air Canada announced it would extend $15 million in financing to Aveos. In a statement, Air Canada said the money was to "assist in stabilizing Aveos for the benefit of its stakeholders and employees so that it can proceed with a more orderly restructuring."
In the statement, the airline said it hoped the money would allow Aveos to reopen some operations that Aveos said it would close, and avoid threatened layoffs. The financing offer is subject to court approval.
The developments represent more woes for the beleaguered national carrier, which has been hit by a string of labour disputes.
The threat of cancelled flights came in a Montreal court during a creditor protection hearing. The airline's lawyers argued in vain Monday for a Quebec Superior Court to order Aveos Fleet Performance Inc. to not lay off more workers and meet its obligations to complete the repairs.
Right now, three Air Canada widebody planes and several narrowbody aircraft are sitting in Aveos facilities across the country, some missing landing gear. If the planes aren't serviced, delays affecting 3,000 passengers could ensue, warned Air Canada lawyer Louis Belanger.
Belanger said the next 24 to 48 hours will be crucial in determining if the aircraft repairs can be completed on schedule.
Earlier, in a Montreal court, Justice Mark Schrager denied an Air Canada request that would have forced Aveos to maintain operations and employment to complete the contracted repairs.
"Accommodation, if there is any between Aveos and Air Canada, is going to be made in a boardroom, not a courtroom," he said before granting creditor protection Monday.
Aveos was once Air Canada's technical services division, but was later spun off as a separate company.
On Sunday, it served notice to employees that it will shut its heavy maintenance operations in Montreal, Winnipeg and Vancouver, laying off approximately 2,400 employees.
On Monday, the company filed for protection under the Companies' Creditors Arrangement Act.
At first, Air Canada played down the significance of the closures.
"These events at Aveos, while disappointing, have no impact on Air Canada's day-to-day aircraft maintenance and repair activities," the airline said, explaining that its daily upkeep is handled in-house.
"The airline typically performs its line maintenance activities overnight or between flights, as necessary," the statement explained.
Meanwhile, the International Association of Machinists and Aerospace Workers says Air Canada caused the problems at Aveos by sending its heavy aircraft maintenance business to other providers.
It said the layoff of Aveos workers is a violation of the Air Canada Public Participation Act and it wants the federal government to intervene and save their jobs.
"We want the federal government to intervene, otherwise a viable industry and its highly skilled workers will vanish forever," said Dave Ritchie, Canadian General Vice President of the IAMAW.
The union contends the government and Canada Industrial Relations Board should have done more to ensure Aveos was financially viable before approving the transfer of workers from Air Canada.
Aveos argues Air Canada is responsible for $10 million in severance payments owed to laid off airframe workers.
Shutdowns prompt protest
The Aveos announcement prompted scores of employees to protest. About 1,000 workers blocked access to an Air Canada building near Montreal's Pierre Elliott Trudeau International Airport Monday morning, while a few kilometres away another group blocked access to an Aveos facility.
Reporting from the scene of the picket at 500 Cote Vertu West, CTV Montreal's Cindy Sherwin said the employees simply want answers.
Aircraft technician Rehan Sheikh said he was floored when his manager phoned to inform him of the shutdown late Sunday afternoon.
"Basically he told me that Aveos has closed down. It's shut down, don't come into work on Monday," Sheikh said.
"It's pretty traumatizing to find out like that. I mean, at least give us a two week notice or something like that."
Aveos employees also protested outside the facilities in Vancouver and Winnipeg.
Air Canada maintenance work accounts for an estimated 90 per cent of Aveos' business.
In its court filing, Aveos said it has been hurt by "uncertain work volume" across all its business lines from its main customer Air Canada and high labour costs.
"Since the beginning of 2012, Air Canada has reduced, deferred and cancelled maintenance work with Aveos, which has resulted in $16 million lost revenue in less than two calendar months," said its court petition.
"While Aveos remained ready, willing and able to perform such work, the loss of such work has been devastating to Aveos' financial position."
Aveos said it was owed $60 million, mostly from Air Canada. As of January, its liabilities exceeded the book value of its assets by $165 million.
The company said it lost nearly $49 million before taxes in the fourth quarter and $9.5 million in the first nine months of last year.
Company CEO Joe Kolshak said Aveos would restart operations if it could successfully develop a restructuring plan, including securing the necessary financing.
"This was an extremely difficult decision, one we made only after lengthy and careful consideration of all other options," Kolshak said. "We deeply regret the job losses and the impact this decision has on our employees in Canada.'
The protests come after a weekend of confusion, delays and cancellations for Air Canada.
The airline appeared to be back to business as usual Monday, although the departure schedule posted on the Greater Toronto Airport Authority website showed Air Canada flights to Ottawa, Montreal, Winnipeg and Seattle were all cancelled. Only one non-Air Canada flight, a Dallas-bound WestJet/American Airlines - was cancelled.
Disruption and frustration loomed over what is typically one of the year's busiest travel periods this weekend, as Air Canada coped with a confluence of factors including weather, fire and an unusually high rate of illness among its pilots.
The woes began Sunday, when flights, mostly out of Montreal, were cancelled or delayed. The disruptions came after several pilots called in sick, creating crew shortages.
The airline has since confirmed that the resulting disruptions were caused, in part, by "higher-than usual pilot book-offs."
"While Air Canada supports the right of its employees to book off when they are unwell or otherwise unfit to work, we cannot condone such activities as part of industrial action to disrupt our operations and we have asked the CIRB (Canadian Industrial Relations Board) to intervene," Air Canada spokesperson Peter Fitzpatrick wrote in a statement to CTV News.
Travellers were frustrated again on Sunday, after an electrical fire knocked out the lights on one of Toronto Pearson International Airport's five runways. With a blanket of thick fog rolling across the region, the runway was shut down.
Air Canada and other airlines were forced to cancel or delay more flights as a result. And by the time the runway was returned to service in the afternoon, the ripple effects were already cascading through airline schedules across the country and beyond.
The weekend-long woes came at an inopportune time for travellers making their way home from March Break holidays, and just days after the Senate passed back-to-work legislation intended to prevent labour disruptions at the airline.
Labour Minister Lisa Raitt tabled that legislation after referring threatened lockouts by its pilots and ground crew unions to the CIRB.
Air Canada is currently locked in a contract dispute with the unions representing its 3,000 pilots and its approximately 8,600 baggage handlers and ground crew.
With a report from The Canadian Press