Air Canada Pilots Fail in Bid to Stop Shareholder Payout
By Joe Schneider, Shanghai Daily | Dec. 30, 2006
Pilots at Air Canada, the country's biggest airline, lost a bid for a court order to block a payout of as much as C$2 billion (US$1.7 billion) to shareholders of parent ACE Aviation Holdings Inc.
Superior Court Judge Peter Cumming in Toronto denied the pilots' request on December 28. ACE Aviation said each shareholder will get a special payout on January 10 of 0.442 units of the Aeroplan Income Fund, operator of the airline's frequent-flier program. The distribution is valued at C$856 million, ACE said in a statement.
"We love it," Jacques Kavafian, vice president at Research Capital Corp, who has a "buy" rating on ACE Aviation shares, told Bloomberg News.
"The amount is bigger than we had initially thought it would be, but it's not a surprise."
ACE Aviation Chief Executive Officer Robert Milton has sold or plans to sell stakes in four units the company owns, including Air Canada, the regional carrier Jazz Air LP and the loyalty program. He said the stock price of the holding company doesn't reflect the individual worth of the units.
The Air Canada Pilots Association, representing 3,100 pilots, sought to block the payout. The union said the payment threatens the airline's future. The company needs more than C$1 billion to meet the pilots' pension obligations, making it a creditor, the union said.
The pilots are considering an appeal, the union said in a statement. The judge said he will explain his decision later.
"We have felt all along that the company's plan unfairly disregards the legitimate interests of Air Canada's creditors, and we will continue to pursue every option available," union President Andy Wilson said in the statement.
The pilots also asked the Ontario court for an order requiring ACE to return the ownership of its stakes in Jazz Air, Jazz Air Income Fund and Aeroplan to Air Canada.
Air Canada has ordered C$6 billion worth of aircraft from Empresa Brasileira de Aeronautica SA and Boeing Co, the union said in the court filing.
"For Air Canada to finance these expenditures at manageable cost requires the preservation of the capital base," the complaint said.
Unions representing Air Canada flight attendants and machinists opposed ACE's earlier distribution plan. The company went ahead with a C$266 million payout of Aeroplan Income Fund units in February, three months after getting investor approval. Those unions didn't go to court.
ACE has accumulated about C$2.89 billion since emerging from bankruptcy protection in September 2004, according to the company's third-quarter financial results. The company, which reported profits in three of the past four quarters, had net income of C$103 million in the third quarter.