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AC to book $120-million charge for Aveos closure

April 27, 2012, Montreal - Air Canada said Thursday it expects first-quarter results to include $120 million in charges related to the shut down of its largest aircraft repair and overhaul provider.


April 27, 2012
By The Canadian Press

Aveos Fleet Performance Inc. filed for creditor protection last month and laid off more than 2,600 employees across the country when it ceased operations.

Air Canada's preliminary estimates indicate it will book a $65-million non-cash loss on investments resulting from Aveos' 2010 restructuring.

It also anticipates a $55-million loss from discontinued operations related to commitments made under a January 2011 Canada Industrial Relations Board ruling that recognized separate bargaining units for Aveos and Air Canada unionized employees.

It now expects first-quarter adjusted earnings to range between $170 million and $180 million.

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Frustrated former Aveos employees have accused the Harper Conservatives of being in a conspiracy with Air Canada by not enforcing a law they say requires heavy maintenance work to be done in Canada.

The federal Air Canada Public Participation Act requires the airline to maintain heavy maintenance operations in Montreal, Toronto and Winnipeg.

The Montreal-based airline said Thursday it has sent several aircraft to government-approved Canadian and international maintenance providers since the Aveos closure.

"In addition to aircraft maintenance, Air Canada requires alternate solutions for its engines and aircraft components maintenance as well as the provision of various maintenance support services,'' it said in a release.

"Air Canada is already working with a network of approximately forty Canadian suppliers as well as additional international suppliers and this network will continue to grow over the coming months.''

For the long-term, it is taking proposals from maintenance suppliers and said it will give preference to suppliers that have or will have some portion of operations in Montreal, Winnipeg, Vancouver or Toronto.

The province of Quebec has said it's willing to provide financial support to potential buyers of Aveos as long as they maintain jobs in Montreal.

It is also taking Air Canada to court, aiming to force it to adhere to the law enacted when the airline was privatized in 1988.

Air Canada said Thursday it "continues to be in full compliance with the letter and spirit of the ACPPA, despite the closure of Aveos and the airline will vigourously defend its position.''

The dismantling of Aveos is expected to begin next week.

Shares in Air Canada, which provided the update after markets closed, ended Thursday down a penny to 83 cents on the Toronto Stock Exchange.