Insolvent Air Canada, whose Hong Kong-based benefactor this week walked away from a rescue deal that expires April 30, should be given an extension of the federal bankruptcy protection that runs out April 15, its restructuring monitor, Ernst and Young, recommended this week.
Hong Kong-based tycoon Victor Li's (
Trinity Time said it would not seek to extend its investment agreement with the Montreal-based airline, carrying out a threat to withdraw if unions did not make concessions on pensions.
But the firm gave the carrier a glimmer of hope, stopping short of killing the idea of a tie-up with Air Canada outright.
"Air Canada's financial performance is somewhat weaker than had been expected under plans previously reviewed by us during the equity solicitation process," said Harold Gordon, a Trinity director.
"More importantly, Trinity believes that in the current industry environment, Air Canada's organized labour structures impair its ability to succeed."
"Without a change in the manner in which Air Canada's employees are organized and their interests represented, Air Canada will not likely achieve a sufficient fresh start to prosper and grow in the competitive environment which it faces," he said.
Li, a Canadian citizen and son of the Hong Kong magnate Li Ka-shing (
Ernst and Young, in a report to a federal bankruptcy court, said it was "of the view that the applicants [Air Canada] should be allowed a period of time to further pursue its restructuring efforts and to commence a process for identifying an alternate equity investor.
"In this regard," said the report, "the monitor proposes that it work with the applicants and its advisors to develop an equity solicitation process in consultation with the applicants stakeholders for subsequent consideration and approval of this honorable court."
The report recommended giving Air Canada an extension of bankruptcy protection "sufficiently long ... to stabilize the restructuring process and allow for the development of an alternative equity process."
Air Canada has pledged to continue flying and said it was seeking alternative investors.
"Our restructuring has become more challenging as a result of record-high fuel prices, increased domestic capacity by our low-cost competitors and the geopolitical issues," said company president Robert Milton.
"I want to reassure our customers and employees that it's business as usual at Air Canada as it has been throughout our restructuring."
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