An Ontario judge has called the chiefs of Air Canada and the Canadian Auto Workers union to a crucial meeting in Toronto this morning in an urgent bid to keep the airline's restructuring efforts alive.
The summons by Mr. Justice Warren Winkler of the Ontario Superior Court came late yesterday afternoon, just hours after talks between Canada's biggest airline and the union collapsed.The CAW, which had been in negotiations with the carrier for 16 days, was the only one of seven unions that could not strike a deal on vital cost concessions being demanded by the airline's financiers.
Judge Winkler issued a directive just after 5 p.m. summoning Air Canada president Robert Milton and his CAW counterpart Buzz Hargrove, along with the airline's executive vice-president Paul Brotto and CAW national transportation director Gary Fane, to a meeting at 10 a.m. in the Hilton Hotel in downtown Toronto, where much of the negotiating has taken place.
"Obviously, the CAW will comply with Justice Winkler's direction and will be there," said Sean Dewart, a Toronto lawyer who is acting for the union.
An Air Canada official confirmed that Mr. Milton and Mr. Brotto will attend.
The summons from Judge Winkler capped a dramatic afternoon that began shortly after 1 p.m. when Air Canada announced it had reached an impasse with the CAW in efforts to win an agreement from the union for $50-million in labour cost reductions.
This is the CAW's share, or so the company calculated, of $200-million in cost cuts being demanded by the airline's key financiers: Deutsche Bank, Germany's largest bank, which has agreed to backstop an equity rights offering of $850-million, and GE Capital Aviation Services, (GECAS) of Stamford, Conn., which has agreed to lend it about $1.8-billion.
"There was insufficient movement in the union's response to the company's offer of May 17 to warrant a continuation of discussions," Mr. Brotto said in the airline's statement.
"We are too close to our goal to turn back," he said. "And so we will immediately commence discussions with Deutsche Bank and GECAS to determine next steps."
The financiers had set last Saturday as the deadline for Air Canada and all its unions to reach agreements, both on the cost reductions and a demand that they agree to waive most of their outstanding grievances against the company.
"Were very disappointed . . . that the talks have broken off . . . and we are evaluating our options," said GECAS spokesman Eric Jones.
Air Canada is due in court tomorrow to seek an extension of its protection under the Companies' Creditors Arrangement Act, and Mr. Jones added that "that's going to be a pretty important date."
Deutsche Bank didn't respond to requests for comment.
Although Air Canada's six other unions all have agreed to cost cutting deals with the airline since last Friday, the CAW has balked, even though during negotiations, the company dropped the total savings target by 10 per cent to $180-million and the CAW's share to $45-million from $50-million.
The CAW represents 4,700 active employees at Air Canada -- customer service agents -- and 2,000 others who are on layoff. Its members also include 1,600 crew schedulers and maintenance workers at the company's Jazz subsidiary, 400 of whom are on layoff.
At a news conference yesterday afternoon, Mr. Hargrove reiterated that the CAW can see justification for only $18.3-million in savings.
"The real issue for us is should we go to our members and say: 'You have to pay $45-million in spite of the fact that the company has only justified $18.3-million,' " he said. "We've said to the company we'll pay every dollar over $18.3-million that you can justify."
Mr. Hargrove complained that Air Canada has not told the CAW what issues it has with the union's latest counterproposal -- presented Tuesday -- on the cost savings. "There's been no effort to contact us and no indication that they're willing to talk to us."
He said he is "troubled" by the turn of events. "I always see some light down the road if you're meeting and talking, but if you're not meeting and talking it's difficult to see where you can find a solution."
Still, Mr. Hargrove again insisted that other investors "with the kind of money that Deutsch Bank is talking about putting in" are willing to step in should the current financing deal fall apart and also that he does not think the court will decide to put the airline into receivership.
"I can't imagine anyone saying . . . as they do in Newfoundland say, 'The arse is out of her, boy, we'll let her go,' " he said. "I don't think so."
Mr. Hargrove said he had talked again just yesterday morning to New York financier Gerald Greenwald, who heads Greenbriar Equity Group LLC, and that he had expressed interest. Mr. Greenwald is the former head of United Airlines, and before that, vice-chairman of auto maker Chrysler Corp.
Kathleen Moran, a spokeswoman for Greenbriar, confirmed that Mr. Greenwald contacted Mr. Hargrove yesterday.
"Under the right circumstances we would be interested in an investment in Air Canada," Ms. Moran said. She added that Mr. Greenwald offered to meet Air Canada's unions but no date for a meeting has been set. She declined to say if Mr. Greenwald has any financial backing for a prospective offer.
Mr. Hargrove also said he has talked to Don Carty, the Canadian-born former chairman of American Airlines parent AMR Corp., who, he said, is trying to put together a group of investors.
One news report yesterday said Mr. Carty's potential backers include Onex Corp., Ontario Teachers Pension Plan Board and Texas Pacific Group LP of Fort Worth, Tex.
Teachers yesterday took the unusual step of publicly disassociating itself from the report that it may be among a group of investors supposedly being pulled together to save Air Canada.
However, in a message to Air Canada employees yesterday, Mr. Milton dismissed what he called the "many myths being floated about . . . who might be willing to step in and invest in Air Canada."
Indeed, he added that "all of the potentially interested investors speculated on in today's press have categorically declined to participate in the equity process."
Mr. Milton also expressed confidence that, despite the impasse, the restructuring will succeed.
In Ottawa, Transport Minister Tony Valeri stuck to his line that the federal government wants a private sector solution.
Mr. Valeri encouraged Air Canada and the Canadian Auto Workers to "redouble" their efforts to reach a deal. "I believe solutions can be found if parties are willing to work together to find them."
On the brink
Air Canada
"We are too close to our goal to turn back." - Paul Brotto, executive vice-president for cost control and planning, Air Canada
CAW union
"I don't think the airline's going down - I don't think that's even a remote possibility." - Buzz Hargrove, president, Canadian Auto Workers
Ottawa
"Solutions to this impasse must come from the private sector. That remains the position of the Government of Canada. - Transport Minister Tony Valeri
Employees
"I think everyone knows what the stakes are here. The rest of the employees have done their share." - Don Johnson, president, Air Canada Pilots Association
Agents
"I say to them at this point we have to consider other carriers." - Sam Pelc, owner, Montreal agency Superior Travel Open Skies
Aeroplan
"Business as usual." - Diane Carignan, Aeroplan spokes-woman, who expects Air Canada to emerge from protection in September.
