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Air Canada Pilots Consider Options Following Denial of Interim Injunction

The Air Canada Pilots are examining all options open to them in light of the decision by the Ontario Superior Court not to grant a request for an interim injunction to prevent ACE Aviation Holdings Inc. from distributing $2-billion to its shareholders. The Court will release the reasons for its decision at a later date. The motion for the injunction was filed on October 30, 2006.

"When we filed our lawsuit, we stated that we feared the distribution as proposed would weaken the company and decrease its ability to withstand a downturn in the economy," says Capt. Andy Wilson, president of the Air Canada Pilots Association. "We have felt all along that the company's plan unfairly disregards the legitimate interests of Air Canada's creditors and we will continue to pursue every option available to ensure that these interests are protected."

Air Canada's pilots filed a lawsuit on Oct. 4 against ACE Aviation under Section 241 of the Canadian Business Corporations Act (CBCA), commonly known as the 'oppression remedy.' This section of the Act states that a company is not permitted to take actions that unfairly disregard the interests of creditors. The suit claims that the proposed distribution of up to $2-billion to shareholders is oppressive to Air Canada's creditors, of which the pilots are one through the over $1-billion in pension obligations that remain outstanding following the company's emergence from insolvency in 2004.

The lawsuit also challenges the ways in which ownership of Jazz Air and Aeroplan limited partnerships were transferred from Air Canada to ACE, as well as the values received by Air Canada for those companies. In addition, the pilots' suit is challenging the non-arms-length contracts between Air Canada and each of these entities, which the pilots say also causes an unfair burden on Air Canada.

Wilson says that the pilots are very concerned about the $850-million distribution announced by ACE Aviation Dec. 28th.

"Air Canada has shown it can prosper in good times. We remain concerned that any large depletion of capital will reduce our ability to weather a downturn in the economy, or other external events," he adds. "The lawsuit remains in place and we will make a decision in the coming weeks on how to proceed."

ACPA is the largest professional pilot group in Canada, representing 3,100 pilots who operate Air Canada's mainline fleet.