4. Air Canada confirms acceptance of Victor Li's investment in insolvent airline, Dec. 22. 03 [This article has disappeared from the website but may be obtainable through the National Post archives for a small fee. If you do a Google search, you will find several articles on this, particularly Li buys 31% stake in Air Canada for 486 million Kenneth Wong, Bloomberg, International Herald Tribune, Nov. 10, 03. NJC]
*** Li, a son of Hong Kong billionaire Li Ka-shing, holds Canadian citizenship and is not restricted by federal guidelines that limit foreigners to 25 per cent of an airline.***
[What follows is from the second article mentioned. NJC]
***Air Canada has accumulated losses of 2.6 billion dollars in the past three and a half years. . . .
Milton and the executive vice president Calin Rovinescu will each receive 1 percent of Air Canada over four years, the airline said. Their stakes will come from [Victor Li's] Trinity's holdings after Air Canada emerges from bankruptcy.
Trinity will appoint five out of the 11 directors on Air Canada's board.***
There is mention in the article of "unnamed sources"; I wonder who they might be. To whose benefit would it be to talk to the media anonymously? Is it time for liquidation to take place -- or should AC find a new investor? NJC
Victor Li's Trinity Time Investments Ltd., frustrated over the refusal of Air Canada's unions to discuss possible changes to their pension plan, has thrown down a gauntlet and says it's ready to renege on its proposed $650-million investment -- a warning that threatens to force Air Canada into liquidation.
[. . . . ] The pension impasse, which has been brewing over the past six weeks, is over Trinity's demands that unionized employees be offered a choice to participate in either a defined benefit pension plan or a defined contribution plan. Unions have refused, arguing protection of the defined benefit scheme was crucial in last year's new collective agreements that had its members grant $1.1-billion in wage and job concessions.
As a result, Trinity, with the help of Goldman Sachs, will now examine all the unions' collective agreements, negotiated in May and June, 2003, and see whether each union is giving up as much as it promised. Moreover, it will determine how much of a financial hit will be sustained by the unions' refusal to give their members a choice on pension schemes.
[. . . . ] The Trinity warning, coupled with similar concerns raised yesterday by GE Capital Aviation Services (GECAS) -- Air Canada's largest aircraft lessor -- are aimed at applying pressure to union leaders. Trinity initially wanted all Air Canada workers to see their pension plans converted to a defined contribution scheme, but backed off following a suggestion from Robert Milton, Air Canada's chief executive, that employees be given a choice on pension plans.
Labour officials rejected that compromise, and last night were adamant they would agree to no change to their retirement benefits.
[. . . . ] Air Canada's current pension scheme, defined benefit, guarantees workers a certain amount per week upon retirement and puts the company on the hook if the pool of contributions -- through bond and stock investments -- can't meet the payouts.
Victor Li knew this when he became involved. Methinks this is an effort to get the unions to back down. There were two American companies interested; perhaps it is time to look into them. NJC
[. . . . ] Meanwhile, defined-contribution provides, at retirement, whatever pension income is available based on accumulated contributions and investment returns. Workers bear the risk but also have control over how contributions are invested.
The Trinity statement added union leaders were unwilling to discuss potential pension changes "despite consistent and widespread expressions of interest on the part of Air Canada employees." Air Canada was conducting an online survey of its unionized employees about whether they wanted a choice of pension plan scheme, but was ordered to stop the polling and destroy the results by federal labour regulators.
At this point, it would be interesting--even imperative--to know who ordered these "federal labour regulators" to become involved and why. It is a helpless feeling most taxpayers as laymen experience when they read these accounts -- just who is pulling strings? -- who ordered the poll? -- who stopped it? -- and of course, why? Surely a poll of union members is an inocuous exercise in a democracy? Or am I being naive -- again? NJC
[. . . . ] Earlier yesterday, GECAS -- which is set to provide Air Canada with $1.8-billion of financing to help it exit creditor protection -- voiced similar worries as Trinity.
At a court hearing, a lawyer for the lessor asked Mr. Justice James Farley of Ontario's Superior Court to postpone all motions dealing with Air Canada until the pension issue is resolved.
While he rejected the request, Judge Farley, who is supervising the reorganization, suggested a "kick in the head" may be in order for the airline, its unions and Trinity to resolve the pension impasse.
You might be interested in going back to March 1 post and any links on that date to learn Judge Farley's previous interventions on behalf of Victor Li and Trinity. A very active and involved judge. NJC
"GECAS is very concerned about the lack the progress on pensions," Eric Jones, a spokesman for the Stamford, Conn.-based lessor, said [. . . . ]
GECAS is not timid about getting its own way. Last year, it threatened to seize its 100 planes from Air Canada's fleet unless the carrier renegotiated new leases and started paying rent. Those talks resulted in the $1.8-billion financing deal.
