Air Canada is set to make a formal offer for Canadian Airlines, after a Quebec judge declared the rival Onex bid to buy Air Canada violated federal law prohibiting any shareholder from owning more than 10%.
The failure of Toronto-based Onex to acquire Air Canada and merge it with Canadian leaves cash-strapped Canadian with only Air Canada as a bidder.
Just days after the Onex withdrawal, Air Canada's largest shareholder, pension fund manager Caisse de depot et placement du Quebec, moved to help finance the bid with a C$300 million loan.
"This new funding immediately increases Air Canada's liquidity to approximately C$1.5 billion," says Robert Milton, the airline's chief executive.
While Star alliance member Air Canada prepares its offer, speculation is rife over whether AMR, parent of American Airlines and a Canadian shareholder, will have any role in the merged operation.
On 9 November, Milton told a Senate committee hearing in Ottawa that he wants to end American's 33% stake in Canadian, but would allow it to continue if it were the only alternative to conclude its bid. American is a member of the rival oneworld alliance.
"I suspect the two sides will reach a middle ground," says analyst Ted Larkin of HSBC in Toronto. He said Air Canada had been in discussion with AMR's Sabre reservation system, of which it is a member, earlier this year to see how it could reduce its operating costs. A deal with Sabre and an agreement allowing Canadian to remain separate from Star Alliance might be worked out, he says.
Source: Flight International
