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Winnipeg Free Press - PRINT EDITION

Aveos airframe division grounded for good

By: Ross Marowits

Posted: 06/8/2012 1:00 AM | Comments: 0

MONTREAL -- Hope appears to be fading for most former Aveos employees after no potential buyers expressed interest in the aircraft maintenance firm's airframe unit, says a report by the monitor overseeing the company's restructuring.

The business employed about 1,500 of the 2,600 people, including about 400 in Winnipeg, who worked at Aveos before it closed operations in March and got court protection from creditors.

Work on repairing and overhauling airframes has increasingly gone to low-cost operations in Asia, Latin America and elsewhere.

Aveos has said its airframe business was not viable, suggesting the most buyer interest will be focused on the components and engine repair divisions.

Air Canada (TSX:AC.B) has reached an agreement with Aveos Fleet Performance Inc. that could facilitate the sale of those two divisions, according to a June 5 report from FTI Consulting Canada Inc, the court-appointed monitor assisting with the Aveos restructuring.

The airline had filed a motion last month to terminate contracts with its former subsidiary, but later withdrew the effort and agreed to continue negotiations.

"The Air Canada agreement results in a higher probability that both the engines and components business will be sold to a party that can restart operations as it will have the support of Air Canada, Aveos' largest customer," wrote Greg Watson and Toni Vanderlaan of FTI Consulting.

However, they cautioned there are still many risks with the sale.

Union representative Jean Poirier said Air Canada's move is good, but it doesn't guarantee engine and component work will return. And there's also nothing positive for the airframe segment.

"If Air Canada has backed down to guarantee contracts for engines and components, it's good news, but you really have to see which contracts they will send (through)," he said.

About 500 former employees in Montreal have found jobs at Bombardier, CAE, Hydro-Quebec and in construction, but most are unemployed, Poirier said.

The union has accused the Conservatives of conspiring with Air Canada by not enforcing a law they say requires heavy maintenance work to be done in Canada.

Air Canada has said it fulfils the requirements of the Air Canada Participation Act by employing 2,400 employees to do maintenance work in Montreal, Toronto, Vancouver and Winnipeg.

The airline declined to provide details about the agreement with Aveos, calling it confidential.

"We have provided arrangements that will assist Aveos's chief restructuring officer in finding potential purchasers for the engine and component business," spokeswoman Isabelle Arthur said in an email.

The Air Canada and Aveos agreement includes a new exclusive contract through 2018 for the engine business, which will be offered for sale along with the engines facility.

"Air Canada has agreed to provide its support and consent to the assignment of the new engines contract, so long as the successful purchaser meets Air Canada's requirements," the monitor said.

-- The Canadian Press

Republished from the Winnipeg Free Press print edition June 8, 2012 B6

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