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Air Canada Files for Bankruptcy


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#1 benn5325

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Posted 01 April 2003 - 20:36

With Octagon going up for sale and the British GP looking somewhat shaky for the future.
What does this mean for the Canadian GP Air Canada Files for bankruptcy. Will this effect it at all?
How much involvment do the title sponsor have in the actual event?


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#2 StickShift

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Posted 01 April 2003 - 20:45

Maybe I'm mistaken, but I thought I heard Labatt's had taken over title sponsorship of the event?

#3 cheesy poofs

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Posted 01 April 2003 - 20:52

Looking out from my office window, I still see A-C planes flying in and out of Dorval airport !

Seriously though, the company will most probably go through a major restructuring and most likely with the help of our government. I seriously doubt if this will make them pull out of their contract with the Canadian GP organizers. The global exposure the airline gets with the GP is too important for them to pass upon.

If it is the case, I do expect associate sponsor Labatt to pick up the mantle.

#4 SlateGray

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Posted 01 April 2003 - 21:34

The Feds (Canadian ratepayers) will get rooked for a few billion to bail them out.

As long as the Liberals are in power AC will stay in the air.

It is one of Jean’s sacred cows!

#5 Crazy Canuck

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Posted 01 April 2003 - 21:36

Ahh crap!

I have 4 round trip flights booked with AC between now and April 25th! Three are paid by work, so who cares ;) , but one is too see my nephew for the first time, he isn't even born yet!

CC

#6 brad_d

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Posted 01 April 2003 - 21:44

Filing for bankruptcy does not automatically mean that an airline ceases flight operations. I believe United Airlines did this some months ago, and flights continue.

Often bankruptcy is pretty transparent to customers - serious restructuring goes on behind the scenes, but the "front end" may or may not change at all.

How this would affect things like advertising and sponsorship may not be clear. Just note, though, that they wouldn't sponsor a damn thing if they didn't expect to make money off the deal in the long run. They don't sponsor events out of the goodness of their hearts, or because they dig motor racing - they expect to gain business from the advertising that the sponsorship provides.

#7 benn5325

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Posted 01 April 2003 - 22:07

Yeah, I wasn't trying to start a panic. I know they're not going to close up shop, look at United, and I believe US Air are just about to come out of bankruptcy, so this by no means, means the end. Just curious to try and find out what involvement the title sponsor has in the event. My Octagon reference really has nothing to do with this. I know Quantas pulled out of the Oz GP after 2000 and it went over to Fosters, not a bankruptcy thing but they said it was too much and their contract had ended.

#8 condor

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Posted 01 April 2003 - 22:15

I might be being a bit dim here :)....but if your bankrupt, doesn't it mean that liabilities are way in excess of assets....and the situation doesn't look like changing - and creditors are paid a fraction of the amout they're owed.

So...they can say they'll carry on sponsoring....but not have the funds available to back it up :confused:

#9 ffiloseta

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Posted 01 April 2003 - 22:18

The writing is on the wall: Airlines can't be managed as they used to; either find a creative way to stay in the market or else. Also, regional conditions can play against an airline so not even a genius can make them stay in business. There is always, of course, the government...

#10 Lada Lover

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Posted 01 April 2003 - 22:56

AC will just have new owners, the old shares will be worthless and new shares will be issued to the new owners, the bond holders. The new owners may have to accept a very small amount of the money they are owed now. The employees and management will have to negotiate new work contracts and I don't know if the old employees get their pensions or not. A lot will change but if everybody accepts the new deal AC will continue to fly.

#11 Jhope

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Posted 01 April 2003 - 22:59

The Federal Government told AC to file for bankrupcy protection if they wanted the financial aid they asked the Feds for back in mid 2002. A supposed sum of 100 million dollars will be given to AC to restructure over the next year or two.

#12 dpardyrx7

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Posted 01 April 2003 - 23:06

For those who have tickets on Air Canada - not to worry. There may be the occasional reshuffling of flights but your tickets will be honored. This is simply a way to get out from their debt burden, restructure their operating costs, and renegotiate wages scales with the various unions. United Airlines has been operating under this format for over a year and their service has actually improved.

There is no way the national carrier for Canada will cease to fly!!

On the F1 front I do believe Air Canada's role with the CAN GP has ended and there are other sponsors lined up. But again there is no way the Canadian Gov't would let the CAN GP slip out of Montreal.

Maybe some of the F1 teams should file for bankruptcy protection and renegotiate their contracts with some of those highly overpaid - under motivated drivers?????

#13 Alfisti

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Posted 01 April 2003 - 23:29

WTF????????????????????????????????????????????????

Jesus now Quantas wil REALLY rob us flying to Toronto.

#14 Jhope

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Posted 01 April 2003 - 23:38

Originally posted by Alfisti
WTF????????????????????????????????????????????????

Jesus now Quantas wil REALLY rob us flying to Toronto.


Fisti, you've been in Canada since when? This shouldn't be news to you. This Air Canada debacle has been going on since before you arrived in Toronto. Not sure if you're back in Sydney, but even if you are, you should have been somewhat aware that Air Canada was in trouble when you were here.

#15 The First MH

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Posted 01 April 2003 - 23:51

I don't think this is anything to panic over. Air Canada's bankrupcy filing is for protection against creditors. They owe something like $12 billion. They are taking the same route US Air took after Spet 11th. They want to use this protection to restructure the company so that it can run more efficiently/profitably. And coincidentally, US Air officially came off bankrupcy protection just a day or two ago. In the meantime though, you can rest assure that Air Canada will continue to fly. I don't think it will impact their sponsorship plans in any major way, but they will scale back plans to increase any form of sponsorship. And so long as they remain the only viable airline in Canada, the federal government will be compelled to bail them out should things deteriate further. It is an essential service of sorts.

#16 dick

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Posted 02 April 2003 - 01:02

I hope they continue to fly. I'm flying Air Canada to the Air Canada Grand Prix. If I get there it will be a miracle. I have a United ticket which is a code share with Air Canada,

#17 flyboy

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Posted 02 April 2003 - 01:24

I just looked at my tickets for the 2003 race and Air Canada is shown as the title sponsor, "Grand Prix Air Canada". I don't know what the Canadian law might be, but in the U.S. they would not necessarily have to honor their contractural obligations.

#18 The First MH

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Posted 02 April 2003 - 01:44

Well there's nothing mentioned on their website: http://www.grandprix.ca/index_eng.html

As I said earlier, I doubt the bankrupcy protection will influence their sponsorship of F1, at least for this year.

#19 Nikolas Garth

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Posted 02 April 2003 - 02:48

Originally posted by Jhope


Fisti, you've been in Canada since when? This shouldn't be news to you. This Air Canada debacle has been going on since before you arrived in Toronto. Not sure if you're back in Sydney, but even if you are, you should have been somewhat aware that Air Canada was in trouble when you were here.

How many major Airlines does Canada have?

We lost one of our big two a couple of years ago, still hard to believe. :stoned:

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#20 The First MH

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Posted 02 April 2003 - 03:17

Originally posted by Nikolas Garth
How many major Airlines does Canada have?

We lost one of our big two a couple of years ago, still hard to believe. :stoned:

Air Canada merged with Canadian Airlines a couple years or so ago. Canada 3000 then went belly up. This leaves us with one national/international carrier --> Air Canada. There are other smaller versions, notably WestJet and Air Trans At. (There is Tango as well, but this is essentially a bare bones Air Canada operation.) Effectively, we therefore only have one national airline. This is why I say that the government will never allow Air Canada to go belly up - they could simply not afford to politically. They will give them slack in the form of subsidies, cheaper rent or fuel etc., which I am sure will be passed onto the other airlines too. And if push comes to shove they'll simply buy it back again, although I seriously doubt that at this stage.

I do suspect that one of the reasons for the bankrupcy protection is to 'shock' the gov't/public into seeing how serious the situation is, and therefore procure better subsidies or breaks from the gov't. Just an opinion though...

#21 Jhope

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Posted 02 April 2003 - 06:10

Well, Mr.Milton speaks as though the restructuring will involve Air Canada flying Canada's flag internationally, leaving other carriers such as Transat and West Jet, to concentrate on domestic and minor international flights, like those to holiday resorts in the carribean.

#22 Jhope

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Posted 02 April 2003 - 06:12

Originally posted by The First MH

Air Canada merged with Canadian Airlines a couple years or so ago.


Actually, Air Canada didn't merge with Canadian, they just bought all their assets after they went tits up.

#23 Alfisti

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Posted 02 April 2003 - 06:37

Nah i never heard of it, they had a number of 'new" branches coming out when i was there. Tango and so forth.

How the hell could they struggle?? They charge a fortune for their flights?????

#24 Jhope

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Posted 02 April 2003 - 06:50

They charge a fortune yes, but no one was bitting. People were flocking to Transat and WestJet. In the meantime, Air Canada thinks that by staring smaller branches like "Tango" and Jazz" they'd get their share of the market back. All those ended up being, were money pits. There were hardly any return, as Transat and WestJet kept their priorities straight, and their market in focus. Their prices were lower, and people were going to them instead. This focus helped them recuperate quicker after Sept 11th, while AC struggled. That struggle turned into today's outcome. Sad, but true. Robert Milton is not the man to lead Air Canada. He's a manipulative, self service, egotistical bastard. He was using up to 10 000 workers as ransom, so the government would give them an advancement of 80 million$ last year.

#25 stuck-in-first-gear

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Posted 02 April 2003 - 07:33

Originally posted by condor
I might be being a bit dim here :)....but if your bankrupt, doesn't it mean that liabilities are way in excess of assets....and the situation doesn't look like changing - and creditors are paid a fraction of the amout they're owed.


Only if the company is liquidated, filing for bankrupcty is like a loud cry for help, albeit very worrying. This could well have a knock-on effect on other star alliance members like Lufthansa...

#26 tifosi

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Posted 02 April 2003 - 11:26

Originally posted by brad_d


How this would affect things like advertising and sponsorship may not be clear. Just note, though, that they wouldn't sponsor a damn thing if they didn't expect to make money off the deal in the long run. They don't sponsor events out of the goodness of their hearts, or because they dig motor racing - they expect to gain business from the advertising that the sponsorship provides.


They wouldn't have started an airline at all if they didn't expect to make money but.................................... :D

#27 tifosi

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Posted 02 April 2003 - 11:30

Originally posted by The First MH
I don't think this is anything to panic over. Air Canada's bankrupcy filing is for protection against creditors.


So who protects creditors from crap-run organizations (or just irrresponsible individuals) that incur legitimate debts and then wont pay them. :p

#28 Jardins

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Posted 02 April 2003 - 14:05

Originally posted by SlateGray
The Feds (Canadian ratepayers) will get rooked for a few billion to bail them out.

As long as the Liberals are in power AC will stay in the air.

It is one of Jean’s sacred cows!


Don't bet on an automatic bailout. The reason AC went into bankruptcy protection was because the government wouldn't give them money. Westjet and the other airlines will be up in arms (and rightly so) if the government are seen to be favouring Air Canada.

That said, I don't think the government will let them go under. It would be very bad politically as there are no real alternatives, none of the other airlines can fill Air Canada's international role. Not to mention, that a lot of the airports would collapse without AC traffic. They may not give them money, but they will almost certainly give them consessions of some sort (tax breaks, etc).

#29 Jardins

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Posted 02 April 2003 - 14:15

Originally posted by Jhope
They charge a fortune yes, but no one was bitting. People were flocking to Transat and WestJet. In the meantime, Air Canada thinks that by staring smaller branches like "Tango" and Jazz" they'd get their share of the market back. All those ended up being, were money pits. There were hardly any return, as Transat and WestJet kept their priorities straight, and their market in focus. Their prices were lower, and people were going to them instead. This focus helped them recuperate quicker after Sept 11th, while AC struggled. That struggle turned into today's outcome. Sad, but true. Robert Milton is not the man to lead Air Canada. He's a manipulative, self service, egotistical bastard. He was using up to 10 000 workers as ransom, so the government would give them an advancement of 80 million$ last year.


Although they blame high labour costs, a major problem for Air Canada is servicing it's debt. It had a major advantage over Canadian when it was privatised because it didn't have a debt, since then it has been operating in red ink and not covering costs. Purchasing Canadian (and all of it's debts) only made the situation worse. They had to rationalize two very different companies and maintain all existing services (a promise to the government and staff of both airlines). This tied their hands when dealing with the changing economic situation.

I agree that AC has been dumb in it's Tango, Jazz and Zip airlines approach. (if nothing else, the names are really dumb! :lol: ) Robert Milton has definitely not done a great job and needs to consider a career change.

#30 mel

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Posted 02 April 2003 - 14:34

This thread started with some relevance to racing, but has become a discussion about Air Canada and bankruptcy. Nothing wrong with that, but I'm moving it across to the Paddock where you can discuss these issues at your leisure.

-mel

Actually, I'll put it in Grand Prix Travelling so that it is still in public domain.

#31 Zmeej

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Posted 02 April 2003 - 15:47

Good posts First MH, and I agree with your estimation of Mr. Milton Jhope :up:

It's true that the feds won't let AC go under, particularly since they're now the "flag carrier" internationally, but at the moment no taxpayer cash has gone into it. Collenette, the transport minister, offered a guaranteed loan, but AC announced they wouldn't be taking it.

Labour costs are an issue in that AC hopes to force wages down to the exploitative levels ($10 an hour) being paid south of the border. The code for this is "being competitive."

There will be layoffs, however, and the union agreed to them.

#32 Eric McLoughlin

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Posted 02 April 2003 - 16:43

Bring back CP Air (and all the others) -

Pacific Western
Wardair Canada
Transair
Quebecair

#33 Jhope

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Posted 02 April 2003 - 17:18

Originally posted by Jardins


Although they blame high labour costs, a major problem for Air Canada is servicing it's debt.


What's that saying? oh yeah! You make your bed, you sleep in it... I have no sympathy for AC, just for their workers.

#34 mach3

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Posted 02 April 2003 - 17:37

Originally posted by Eric McLoughlin
Bring back CP Air (and all the others) -

Pacific Western
Wardair Canada
Transair
Quebecair


Wardair was the BEST!!

#35 Alfisti

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Posted 02 April 2003 - 23:37

Originally posted by Jhope
They charge a fortune yes, but no one was bitting. People were flocking to Transat and WestJet. In the meantime, Air Canada thinks that by staring smaller branches like "Tango" and Jazz" they'd get their share of the market back. All those ended up being, were money pits. There were hardly any return, as Transat and WestJet kept their priorities straight, and their market in focus. Their prices were lower, and people were going to them instead. This focus helped them recuperate quicker after Sept 11th, while AC struggled. That struggle turned into today's outcome. Sad, but true. Robert Milton is not the man to lead Air Canada. He's a manipulative, self service, egotistical bastard. He was using up to 10 000 workers as ransom, so the government would give them an advancement of 80 million$ last year.


WTF???? WestJet are SCARY expensive. I flew to BC from TO and Westjet were by far the worst.

I can see AT eating into local flights but Westjet????

In any case, they have all of international Canada to themselves, how the flying f@@@ could they go wrong?? Bloody big country ... and i am froma bloody big country.

#36 Nikolas Garth

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Posted 03 April 2003 - 06:23

Originally posted by Alfisti
In any case, they have all of international Canada to themselves, how the flying f@@@ could they go wrong?? Bloody big country ... and i am froma bloody big country.

Maybe they and Ansett shared executives? :D