Brian Dunn/MONTREAL
Air Canada is moving to restructure the debt and other long-term obligations of Canadian Airlines International after getting the go-ahead to buy its rival. Canadian owes bondholders, lessors and banks C$1 billion ($680 million). Over C$2.2 billion in capital and operating-lease payments are due over the next few years.
Ottawa had little option but to approve the C$92 million buy-out, but imposed conditions to encourage competition and protect consumers from price rises. Air Canada must give up slots and gates at major Canadian airports to new competitors and must sell Canadian's regional subsidiary, Canadian Regional Airlines.
Neither will Air Canada be permitted to launch a proposed discount carrier in eastern Canada before 30 September. If an airline other than WestJet (which also plans discount operations) does so, Air Canada will have to wait until 30 September, 2001. Air Canada must also undertake not to raise fares and continue flying to remote communities.
Air Canada plans to operate Canadian as a separate entity, with both carriers offering sales and frequent flier points through their own programmes. Canadian will withdraw from the oneworld alliance and join Star, but will continue to codeshare with American Airlines on certain routes.
On 4 January, Air Canada announced that it had acquired 82% of Canadian's common stock, and was close to purchasing preferred shares held by American Airlines' parent AMR. Canadian's board subsequently resigned, although president and chief executive Kevin Benson will remain. Air Canada has appointed Rupert Duchesne senior vice-president of international operations and moved him to Calgary to oversee integration efforts. It aims to streamline Canadian's schedule and reallocate capacity within months.
• Quebec Solidarity Fund is seeking financial backing from Air Canada and Ottawa to relaunch InterCanadian Airlines. In eastern Canada a discount carrier - Canjet - is planned by Ken Rowe, president of Halifax-based IMP Group. Rowe might also relaunch Atlantic Airlines. Canada 3000 also aims to fill the gap left by Canadian.
Source: Flight International
