With high stakes for the Star and oneworld alliances, United and Lufthansa Airlines appear ready to intervene on Air Canada's behalf.
Onex won court approval to call a meeting of Air Canada shareholders on 8 November, effectively pre-empting a special meeting Air Canada had set for January. Onex wanted to hold this meeting before the end of Ottawa's 90-day anti-trust suspension and before its own offer expires.
Air Canada has two lawsuits pending over the legality of the entire process. But if they do not succeed, a November meeting raises the spectre that Air Canada's shareholders could vote to accept the Onex offer, even though Air Canada's board unanimously opposes it. One concern is that financial institutions, which have boosted their stakes in Air Canada since the start of this dispute, might vote to accept the Onex offer for a quick profit.
The risks inherent in any shareholder vote have prompted Air Canada and its allies to formulate plans to head off Onex.
One option is for United and Lufthansa to buy a big enough stake in Air Canada to block any vote in favour of Onex. None of the three airlines will comment on reports that United and Lufthansa each plan to buy 10% of Air Canada, while a Canadian bank, probably the Bank of Montreal, would buy another 15% of Air Canada's shares. This bank owns Chicago's Harris Bank, which is the stock transfer agent for United. Word of this plan leaked out after UAL chairman Jim Goodwin briefed United's pilots on it.
United is required to consult its pilots and machinists on any major undertaking.
A second option is for Air Canada to counter-offer to buy Canadian. On 19 October, Air Canada announced a $930 million plan, put together by Star partners, under which it would buy Canadian and operate it as a distinct brand. It would also create a new low-cost carrier.
It is in the interest of United and Lufthansa to buy Air Canada shares or help fund a counter-offer. United receives about $200 million and Lufthansa $100 million annually as a result of Air Canada's membership in Star alliance. American's annual benefit from Canadian's membership in the oneworld alliance is estimated at $120 million. AMR, American's parent, holds the maximum allowed stake in Canadian and has agreed to help Onex fund its offer.
A vote by Air Canada's shareholders to accept the Onex offer would not end this dispute. Transport minister David Collenette has said he wants any merger reviewed by parliament, where it could face stiff opposition.
Source: Airline Business
