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( For retirees of the new Air Canada family)
Number 476 April 26th, 2000, We first Published in October 1995
Chief Pilot - Vesta Stevenson - Co-pilot - Terry Baker
<NEW> e-mail address is:
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. We welcome -
Jeff Lomas Performance Analyst living in Manotick, ON
email:
Harry Davies email
Content-Type: text/plain; charset=us-ascii
Content-Transfer-Encoding: 7bit
Jim Robertson living in Gloucester, ON email is
Nicole Arbuthnot retired Flight Attendant lives in Oakville, ON
email email:
Canadian Airlines, Maintenance Manager
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. Reminder -
Air Canada Pionairs Annual General Meeting is this coming weekend -
The Executive promises this to be the best so far this century -
see you there!
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. Need to know.
Rumour: Air Canada (AC) intends to allow Canadian Airlines (CDN)
to go bankrupt.
Truth: This is false. Air Canada has no such intentions.
Rumour: The employee newsletters for both Air Canada
(Horizon’s…News for us) and
Canadian Airlines (Canadian Flyer) will be merged.
Truth: This is false. There are currently no plans to merge the two publications.
Rumour: AC pilots will walk off the job in late April.
Truth: This is false. While AC pilots, represented by the Air Canada
Pilots Association (ACPA), have applied for a conciliation process,
AC welcomes this process.
Rumour: AC will participate in a computer purchasing program for its
employees.
Truth: This is currently under investigation by AC.
No final decisions have been made.
Questions and Answers:
Q: Air Canada is the Ground Service Agent for Lot Polish Airlines,
Pakistan International Airlines, Cubana Airlines, etc.
Are they coming to Terminal 1 (T1) as well?
A: Lufthansa and Mexicana will move to T1.
United Airlines will remain in T2. We will continue with
LOT Polish Airlines and CSA until the end of 2000, at which
time they’ll move to T3. To avoid a three-terminal operation in
Toronto, we won't handle contracts in T3. This will allow us to
concentrate on our T1 and T2 operations.
Q: Is Air Canada going to provide freighter cargo service again?
A: Robert Milton has stated Air Canada is looking into the
possibility of re-entering the cargo freighter business.
However, no decisions have been made.
Q: As AC owns 10% of the numbered company, who owns the
remaining 90%?
A: Paul Farrar, a former executive with the Canadian Imperial
Bank of Commerce (CIBC) owns the remaining portion of the
company. He is a specialist in debt restructuring.
Q: It’s said there’s a nine-month period that’s critical to the ultimate
success or failure of a merger.
When did this period start for AC and CDN?
A: It began at the end of January and will be completed at the end of October.
Send any rumours or questions to Employee Communications
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. Announcement from Alan Rust -
NEW CONFERENCE AREA ON THE AC FAMILY NETWORK
The long awaited Conference Area on the AC Family Network has now
been set up. We may have some "teething" problems at first and may
change things around a bit, but it essentially now open for business.
I think this area has been needed for many months, especially with all
the news and rumours about the AC/CAI integration going on.
You must be a member of the AC Family Network in order to access this area.
Although most subscribers to the NetLetter are eligible to access this area,
you will need to register with the AC Family Network to get a password first.
(if not AC Family members already)
Please note: many "NetLetter" readers are already members, so please do
not apply again. If you received the AC Family News a few days ago, then
you are a member.
If you would like to register for the AC Family Network, please go to the
registration page at http://www.acfamily.net/regform.html
Once registered, you can access the conference area within the "members"
area (click on "Conference")
Questions? Please visit http://www.acfamily.net/ntl_register.html
created especially for "NetLetter" subscribers.
More Questions or suggestions? Please email
Once you are an "AC Family member" you will be able to access the
conference by clicking on "Conference" in the members area.
Regards, Alan Rust Web Administrator AC Family Network
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. Reminder -
For the NetLetter readers only, please look for our booth at
the Sheraton Wall hotel in YVR on Saturday Apr 29th before
during and after Business meeting. Tom, Alan, and Terry will
be there to promote our Web sites and the NetLetter.
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. From the RAPCAN newsletter issued by Duane Frerichs -
Reprint of Air Transport World, April 2000.
Title: 'IT'S GOING TO BE SPECTACULAR'
Robert Milton looks forward to turning Air Canada and Canadian Airlines into
a global powerhouse
By Perry Flint In Montreal
Air Canada's new President and CEO Robert Milton had what you might call
a baptism by fire. Last Aug. 24, only 18 days after being named to succeed
R. Lamar Durrett, he was confronted with the biggest crisis in Air Canada's
11 years as a private company when Onex Corp. and American Airlines made an
unsolicited C$1.8 billion ($1.2 billion) takeover bid in hopes of merging
Air Canada with failing cross-country rival Canadian Airlines Corp.
Perhaps they figured the young CEO, who rose to the top after only eight
years at the airline and has yet to celebrate his 40th birthday, was an easy
mark. If so, they figured wrong. Milton fought back hard, launching stinging
attacks in the media against the would-be acquisitors and the political
maneuvering that seemingly made their bid possible. He rallied the Star
Alliance to support a C$1.1 billion recapitalization plan and then had the
Onex/AA proposal declared illegal in a court victory that cleared the path
for Air Canada's own C$92 million acquisition of Canadian.
When Canadian's board of directors on Dec. 4 recommended that
shareholders approve the Air Canada offer, Milton's triumph was complete: In
a period of less than four months, this newcomer from across the border had
bested American Chairman and CEO Don Carty and Canada's own ruling Liberal
Party and had reversed 63 years of national transportation policy by
unifying the industry around one carrier. Overnight, Air Canada vaulted to
the front ranks of the world's airlines with a route network that spans the
globe and combined annual revenues of nearly C$10 billion. "We now own
franchise Canada for the airline industry," he declared to ATW recently.
Milton has not rested on his laurels. He has taken a firm line with
Canadian's lenders and lessors over that airline's debt and lease
obligations, warning that if he can't get a better deal, a bankruptcy filing
is a real possibility. "If the creditors don't want to play ball, we can
pick up the pieces and build from scratch," he stated on Feb. 2, and the
same day Canadian declared a temporary payment moratorium on its debt and
lease rentals.
Shortly after Air Canada was assured of voting control of Canadian, the
carriers began a dramatic route restructuring aimed at integrating their
networks and ending the wasteful and costly domestic route duplication that
has been a staple of Canada's airline industry for most of its history. The
goal is to turn perennially unprofitable Calgary-based Canadian into a
money-making franchise, move it into the Star Alliance and merge it with
already profitable Air Canada as soon as is practical. In the meantime, the
two are flowing traffic to each other via codesharing.
Milton has pledged that although approximately 2,500 of Canadian's
17,000 employees will disappear through attrition, early retirement and
voluntary severance packages, there will be no forced layoffs at the smaller
airline. To hear him tell it, layoffs won't be necessary: "I want our
employees to understand that this is the greatest career opportunity that
they will ever face," he explained to ATW.
"This is not a traditional type of merger . . . this is ending 62 years
of duplication and losses. [Canadian] is a great operational company, with a
great track record on service—their service is fantastic—but they've been
absolutely stagnant. When I moved to Canada eight years ago they had 88
jets. They are down to 80 now . . . pilots are sitting in the same seat in
the same aircraft type that they sat in 15 years ago and they are being paid
the same amount as they were 10 years ago. There is no way to keep people
motivated and on side and keep a winning spirit with that kind of track
record. That will dramatically change in the coming months."
In fact, Milton has estimated the bottom-line benefit of combining the
carriers at C$650-C$800 million annually. Where does it come from? The
creation of a unified network that will feed and be fed by Air Canada's
global alliance partners in Star, and the synergies created when excess
domestic capacity is redeployed into new markets that can then feed the
integrated domestic and international route network.
Milton explains: "On route after route coast-to-coast, there are two
airplanes leaving at the exact same time. A perfect illustration would be
Montreal-Vancouver, where two A320s, both with 132 seats on them, depart at
9 a.m. and go to Vancouver. By taking those aircraft out and replacing them
with a 767 with 191 seats, we're going to be able to fill 100% of the
capacity demand. We'll take one aircraft—and Montreal-Vancouver-Montreal is
10 hours of utilization—and we'll create new routes, like Toronto-Ontario,
Calif. . . . And we're going to do that all over the place. The swing
between this sort of wingtip-to-wingtip hammering each other and new
opportunities, between less-than-spectacular and highly profitable, is amazing."
Another benefit: With Canadian's future assured, it won't be in a position
of having to make deals to generate cash flow. "Canadian, because of their
dire condition, has been very aggressive in buying the business, whether
it's seat sales or corporate discounts or overrides, kind of like Eastern
did years ago when they were in so much trouble," Milton says.
Capacity freed up also will be used for opportunities that could not be
exploited as long as the two airlines were trying to sustain competing hubs
in a nation of only 29 million people. For example, Air Canada will not have
to feed as much traffic through Toronto. "If you look at routes like
Montreal-Calgary, there are only two nonstops per day, one from each
airline, both in the evening; [and] all day long there's traffic split
between the two airlines that has to be funneled over Toronto to get to
Calgary." Now Air Canada can put in three nonstops a day between Montreal
and Calgary "because the mass is now there to bleed the traffic off Toronto
and just fly it nonstop, which obviously is friendlier to the consumer."
Other new routes include Montreal-Edmonton and Halifax-Vancouver with
A319s. Montreal capacity will grow by 17%, with seven new routes and a total
of more than 1,000 weekly flights, allowing it to become a minihub.
In sum, Air Canada intends to pull 19% of the combined capacity out of
Canada and redeploy it into the US, which Milton describes as "the
highest-margin, fastest-growing, most-profitable business we've got." The
carriers are adding a half-dozen new transborder routes and will move to
hourly shuttle-type service in markets such as Toronto-New York LaGuardia
and Toronto-Chicago. Together they are adding more than 380 weekly
transborder flights, including 245 from Toronto, where they recently
consolidated their domestic and transborder operations in Terminal 2 and
their international operations in Terminal 1.
Across the Atlantic, Air Canada/Canadian this summer will offer 15 daily
flights to London Heathrow, versus British Airways' four. "Obviously BA
could add more if they want, but the value of a slot to them at Heathrow is
not worth it on Canada," Milton says. "But this is our home, this is where
we make our money." The success of Star means that Air Canada will offer
twice-daily 747-400 service from Toronto to Frankfurt in addition to a daily
747-400 flight operated by Lufthansa, "and this is in a market that three
years ago we had trouble sustaining a 767 in the winter." Air Canada also
will start Toronto-Munich daily service, "a good bleed-off from Frankfurt,
because sometimes the beyond capacity for Frankfurt is a little difficult to
get hold of."
Long-term, the greatest opportunities probably lie in Asia, where
government policy kept Air Canada a distinctly second-class citizen to
Canadian. Says Milton: "We were restricted to flying to Hong Kong four times
a week, which is very inefficient. Taiwan was only three times a week. Well
now you take that picture and you look at what we've been announcing: You'll
have Toronto-Tokyo nonstop daily with an A340, and for us that feeds right
into the United and All Nippon Airways massive complexes at Narita. This is
going to be a spectacular success . . . "
Toronto-Hong Kong will start on a daily basis in May and Air Canada is
trying to get approval to start Vancouver-Shanghai. It will drop its Taipei
service and leave the Canadian 747-400 flight in place. It will drop its
four-times-weekly Vancouver-Hong Kong service, "but that will still leave
the one daily Canadian flight and our Toronto-Hong Kong service, so Asian
profitability will be very much strengthened." A new Vancouver-Washington
Dulles flight will provide one-stop connections to Asia. "The real story on
this whole thing to me is network," Milton sums up. Vancouver's capacity to
Asia in terms of ASMs will rise by 13%. Transborder and international
capacity out of Toronto will jump by 18% and 22% respectively.
The route restructuring was accompanied by some aircraft changes.
Canadian grounded its last four DC-10-30s, replacing them with 767-300ERs.
Air Canada is retaining two A340-300s it had planned to return to the lessor
and is adding four A330-300s.
Gains on the revenue side will be accompanied by cost savings, according
to Milton. "Air Canada's added size and strength, financially, enable us to
buy things for a lot less than they were paying. So just on its own phone
line costs, we found that if we apply our rate to what Canadian's got,
there's a C$3 million saving per year, so that's in the bank. But we're now
going to the phone company and saying, 'Okay, now you've got the mass of the
two so our rate should come down as well.' On insurance, by switching to our
insurance policies, there was an instant C$3 million savings. Credit card
fees are another area: Applying our rates with the credit card companies to
Canadian's volumes will produce a C$5 million saving. These are three little
examples that are worth C$11 million."
How soon will the two airlines be fully merged, including integrated
crew lists? "I'm really easy about this . . . I'm game to go there as
quickly as possible," he declares, "but to go there I want the employees on
my side. I want them to say, 'Let's forget about this two-airline stuff and
get on with it.'" Owing to the ability to codeshare, the pressure to merge
fully is far less than it would have been five or 10 years ago.
"Operationally I can optimize and the codesharing means that I can funnel
the traffic onto Canadian with the AC code and get every drop of benefit out
of the combined networks." But he believes full benefits come with a merger.
Air Canada also will not consider a merger until Canadian is able to
restructure its heavy debt load, including its operating lease obligations.
Milton is typically blunt: "I'm willing to develop restructured finances and
relationships with these creditors that make sense for them and us on a
long-term basis . . . but they're going to have to be reasonable. And if
they're not . . . I might as well let it fall apart and just buy assets
through the court with the permission of the judge." Through early March,
Canadian had made substantial progress in this regard, having reached
agreement in principle with creditors representing 55 aircraft in its fleet.
But the biggest challenge isn't fixing Canadian's balance sheet or
figuring out where to put resources. The biggest challenge, says Milton, is
managing employee expectations. "I know that because our people have never
been through an acquisition and because the Canadian employees have been
through so much turmoil for so many years, the anxiety levels are high. I
just hope they will be patient and watch it unfold, because it's going to be
spectacular."
Ugly duckling balance sheet
Combining Air Canada's already leveraged balance sheet—made more so by
its C$1.1 billion recapitalization plus the acquisition of Canadian and some
portion of its C$3 billion in debt and off-balance-sheet lease
obligations—will result in a debt and lease load for the two airlines of
close to C$10 billion, with around C$6.6 billion of that residing at Air Canada.
"Our balance sheet wasn't pretty even before Onex," CEO Robert Milton
agrees. "I look at our position as being somewhat similar to the US guys
maybe four years ago. Yes, our balance sheet is in kind of rough shape. But
at the same time we have a [unique] opportunity and it's my expectation and
commitment that we're going to begin throwing off massive earnings. Yeah,
we'll need a few years . . . but we have not found it restrictive at all in
terms of getting the financing we need, and we've got ample liquidity to
maintain that." At year end Air Canada had C$521 million in cash and unused
credit facilities plus financing commitments of more than C$610 million.
Powerful performance
Air Canada's success in besting American Airlines and Onex Corp.
paradoxically overshadowed its strong operational and financial recovery
from the impact of the 13-day pilot strike in September 1998 that pushed it
into a full-year loss for the first time since 1993. In fact, despite Onex's
attempts to portray Air Canada as a stagnating underachiever during the
takeover drama, the airline enjoyed record operating income of C$503 million
in 1999 for an operating margin of 7.7%, its best in 27 years. Net earnings
of C$213 million on revenues of C$6.5 billion represented a solid turnaround
from a loss of C$16 million on sales of C$5.9 billion in 1998.
Adjusting for the negative impact of the strike on 1998 operations, 1999
revenues rose 5% while passenger revenues increased 6% despite a 1% decline
in seat-miles. Passenger yield was up 5% while RASM climbed 7%. On the cost
side adjusting for the strike, CASM increased 5% but only 3% when rising
airport and navigation charges are excluded. Operating margin was ahead 1.3
percentage points.
Throughout the year ontime performance improved steadily, and for the
full year the airline recorded a 5-point improvement over 1998.
Star power
Air Canada expects to reap C$500 million in revenue from its
participation in the Star Alliance this year, according to CEO Robert
Milton. But revenue tells only part of the story because the profit margin
on Star revenue is well above average, he explains.
"This past year we were a 7.7% operating margin airline. The Star
activity could be twice that. So the Star Alliance is probably pushing C$75
million in profitability down to the bottom line. This is a massively
important and massively successful story for us and all the Star
participants. When these routes come online and the association with the
Star partners kicks in, the results are phenomenal. Even a route like
Toronto-Copenhagen, which is a joint venture with SAS, a lot of us weren't
sure . . . we knew the summer would be OK, but we're into the winter and the
results are great."
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. Remember when?
On May 22nd 1959 Victoria's Patricia Bay airport was renamed
Victoria International Airport.
Dorval, Montreal's airport was opened September 1st 1941.
The first air bridge in Canada was installed by Air Canada at Dorval on
December 1st 1966.
St. Hubert in QC was the first airport to introduce a passenger toll in Canada.
Surprised? This was authorized in 1927 no less, and many assumed this
to be an innovation of the 1970's. The passenger toll for each
passenger carried was .10c, except passengers in transit. The
toll must be paid by the operators at the close of each day.
Trans-Canada Air Lines began service from St. Hubert in 1938 using the
10 passenger Lockheed L10 (Electra) until 1941, when the service was
moved to Dorval. Dorval opened on September 1st 1941.
Trans-Canada Air Lines inaugurated service YUL-PIK with Canadair DC4M
CF-TEL on April 15th 1947.
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. Found on the internet.
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. Terry's travel tips.
When travelling on British Midland be aware that Hand Baggage allowances
should not exceed 45" overall dimensions (H+W+L) and with a maximum
weight of 7 kilos.
News from the World Airlines Clubs Association (WACA)
Hosted by the Airline Club of Singapore -
Great Singapore Sales and Malaysia Tour 2000 -
June 29th - July 4th - priced at sgd$850.00
Package includes: 6 night accommodation, full board,
cultural dances, transportation & transfer in Malaysia
and more
DEADLINE: May 31st.
Further details
or your local interline club.
Sweden Interline Club is hosting the Nordic Adventure 2000 -
July 19 - 24th priced at sek4600
Package includes: 5 nights accommodations, 5 breakfast,
2 lunches, 5 dinners with beverages, a welcome cocktail,
2 sightseeing tours, 2 guided tours, entrance fees,
bus from STO to OSL.
DEADLINE: June 5th.
Further details
nearest interline club.
Dargal Interline -
Great Escapes May 3rd Vision of the Sea - 11 nights
Honolulu to Vancouver from us$68.00 pp per night.
Thru 'till October, Norwegian Majesty - 7 nights
Boston return from us$63.00 per person per night.
12 days to see Europe. May 12 Lisbon - Istanbul
May 24 Istanbul to Rome.
either from us$64.00 per day.
From us$66.00 per day you can enjoy the Caribbean aboard
the Grand Princess for 7 days from Ft. Lauderdale.
Alaska is only from us$68.pp per day - 11 days round trip from
San Francisco departs May 26th
Port fees/Gov't fees additional on all the above.
Is Derby Fishing your thing?
2nd annual fishing derby in Queen Charlotte Islands
5 days Aug 22 - 26th.
or 1st annual Women's derby for 3 days on Quadra Island, BC
July 24-26th.
Call 1-800-690-3223 for more details.
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. Smilie.
Gord Dalziel sends this 'sick' joke!
Take Out
I had an offer from a large company and they offered to fly me
out to the meeting on business class. During the return flight
we were given gourmet brownies and cookies. Not hungry, I decided
to save them for later, so I placed them in a vomit bag. After
the plane landed I got up to leave and a stewardess approached me.
She asked, "Sir, would you like for me to dispose of that for you?"
I said, "No thanks, I'm saving it for my kids."
Gord Dalziel
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. DID YOU KNOW?
That you can read or retrieve back issues of "theNetLetter" ?
Just visit our web site at:
http://www.acfamily.net/netletter
and click on the "Archives" button.
This area is only open to "the NetLetter" subscribers and you will
need the following password to enter -
User Name: netletter Password: vesta
=========================================================
Mailing of 'the NetLetter" is courtesy of Alan Rust administrator of
the "AC Family Network" at: http://www.acfamily.net
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