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Purser: Another Disaster

Air Canada’s bold fleet modernization program collapses as union problems erupt anew.

September 28, 2007  By Richard Purser

Airlines have been managing on a tightrope ever since deregulation,
which started in the US and gradually spread, removed them from the
protective government cocoon of price control and route allocation.
Freewheeling competition among large, unwieldy companies is no easy
thing, especially in an industry where safety concerns have to remain
paramount no matter what the financial situation.

Canada has not suffered as grievously as some Canadian, US and foreign
airlines – after all, it has survived – but still, it has had a rough
ride. When one crisis is overcome, another one always seems to be
around the corner: 9/11/01 followed by SARS followed by a brush with

Now, less than two months after Air Canada proudly announced a bold fleet modernization program, it has suddenly fallen apart.

what the original April 25 announcement said: “ACE Aviation Holdings
Inc., the parent company of Air Canada, and Boeing today announced a
widebody fleet renewal plan for the airline that includes up to 36
Boeing 777s and up to 60 Boeing 787 Dreamliners. Air Canada will use
the airplanes to modernize its existing fleet and improve operating
efficiencies, creating one of the world’s youngest and most simplified
airline fleets.”


The news release went on for another 17
paragraphs in which ACE chairman/president/ CEO Robert Milton and Air
Canada president/ CEO Montie Brewer rhapsodized about the glories of
this new deal. But buried in the middle of the release was its shortest

“The order is subject to several conditions including
final documentation. The companies expect to finalize the agreement by

Some of the ‘conditions’ became evident in a news release on June 9:

Canada said today that it had reached a tentative agreement with the
Air Canada Pilots Association (ACPA) on costs and other related issues
relating to the introduction of the new Boeing widebody aircraft in the
fleet. The agreement with ACPA is subject to ratification by the union

“The aircraft purchase agreement with Boeing is
subject to the successful completion of certain conditions by June 10,
including the negotiation of satisfactory terms by the airline with its
pilots on costs and other related issues. The airline has received from
Boeing an extension of the June 10 deadline to allow sufficient time
for the ratification process to take place. Pending pilot ratification
by June 19, the agreement is expected to be finalized allowing the
aircraft order to go forward.”

But it didn’t happen, and this announcement came on June 18:

Canada said today that it has been informed by ACPA that the tentative
agreement on costs and other issues relating to the Boeing order has
been rejected by the union membership … The company accepts the pilots’
decision and has notified Boeing of the order cancellation.”

This was just before WINGS’ press time, and the fallout was just beginning. But it’s a disaster.

June 18, 2005, Boeing issued the following statement: “We share Air
Canada ‘s disappointment at today’s developments because we are looking
forward to being a part of Air Canada’s vision for leadership. We are
seeing very strong demand for the 777 and the 787, and we believe we
will have many opportunities to place these aircraft elsewhere.”


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