TRANSPORTATION REPORTER
A company that repairs Air Canada's fleet of aircraft faces a cash crunch, sparking fear among labour leaders that cost-cutting measures might shift mechanics' jobs from Canada to El Salvador.
Aveos Fleet Performance Inc., formerly named Air Canada Technical Services, owes $715-million to a consortium of lenders, and failed to meet scheduled debt payments on Jan. 16, according to an audit of Aveos conducted by KPMG.
Montreal-based Aveos "is actively pursuing various options with potential lenders and investors which, if accepted, will enable the borrower to achieve its business plans," the audit said.
ACE Aviation Holdings Inc., which owns 75 per cent of Air Canada, retains a 27.8-per-cent interest in Aveos, having unloaded a majority stake in the firm for $723-million at the height of the leveraged buyout boom in 2007.
The majority owners of Aveos are buyout specialists: New York-based Kohlberg Kravis Roberts & Co. and Sageview Capital LLC of Greenwich, Conn., founded by two former KKR partners.
But their investment has crumbled during the credit crisis, recession and downturn in the market for aircraft repairs, maintenance and overhaul. Airlines have parked many planes and deferred certain maintenance, meaning less work for Aveos.
Aveos is in talks to restructure its debts.
"We are not in default of our loans. We're working with our lenders and shareholders, and are very comfortable with our situation. We are progressing as planned with our financial and operational performance this year," Aveos spokesman Michael Kuhn said yesterday.
At the end of 2008, the company owed $479.5-million to one group of lenders and another $235.9-million to another syndicate. "The ability of Aveos as borrower to continue as a going concern and to realize the carrying value of its assets and discharge its liabilities when due is dependent on the successful completion of the actions taken or planned," the KPMG audit said.
Aveos employs about 2,200 staff in Montreal, 600 in Winnipeg, 300 in Vancouver and more than 1,400 at the Aeroman division in the El Salvador capital of San Salvador. An estimated 65 per cent of Aveos's contracts in Canada are with Air Canada.
In labour talks last week with Air Canada, the International Association of Machinists and Aerospace Workers won the battle to keep more than 3,000 Aveos workers in Canada on the carrier's collective agreement for the next 21 months, said Marcel St-Jean, president of IAMAW Local 1751 in Montreal.
In an interview yesterday, Mr. St-Jean said the Montreal and Winnipeg bases, which must remain open under the Air Canada Public Participation Act, already suffered job cuts last year. If the Canadian mechanics and technicians have their labour contracts switched over to Aveos in the spring of 2011, hundreds of positions in Canada might be transferred to San Salvador, he warned.
Canadian employees earn between $1,700 and $5,500 a month, depending on their skills and experience. That compares with $350 to $1,200 a month at Aeroman.
"Aveos is not in very good shape, but they've got a huge plot of land down there and work will be migrated over there. That would be the cost-saving measure," said Mike Sanghera, an IAMAW vice-president in Vancouver.
Mr. Kuhn rejected the union comments, saying there are no plans to transfer repair contracts out of Canada. "Air Canada work isn't going to El Salvador," he said.
Aveos plants in Winnipeg and San Salvador both service narrow-body Airbus A319s and A320s, conducting labour-intensive airframe heavy maintenance.
For now, the Winnipeg facility focuses on Air Canada contracts and the San Salvador plant does repair work for other carriers such as JetBlue Airways Corp. of New York.
Montreal and Vancouver specialize in wide-body contracts, and union leaders worry that the San Salvador site could eventually expand to handle wide-body jets.
The IAMAW said its members are content to keep their collective agreement with Air Canada instead of Aveos because of the airline's pension plan and other benefits.
© The Globe and Mail
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