Business

DESPERATE MEASURES

MARY NEMETH November 18 1996
Business

DESPERATE MEASURES

MARY NEMETH November 18 1996

DESPERATE MEASURES

Business

The skies keep getting darker for Canadian Airlines International Ltd., which has piled up $1.4 billion in losses since 1991 and could soon be running short of cash. According to the company, continuing operating losses threaten the viability of the Western-based airline. Last week, Canadian’s two biggest unions brushed off demands for wage rollbacks, calling instead for some measure of government assistance. But Ottawa appeared reluctant to play the white knight.

Canadian itself has not asked for a government bailout. CEO Kevin Benson instead tabled a detailed restructuring plan, including a 10-per-cent wage cut that would save an estimated $70 million a year. Many workers, however, say they have already contributed enough in recent years by giving up a portion of their salaries to invest $200 million in the corporation and agreeing to productivity concessions designed to save $93 million in 1996. “We frankly are not prepared to ask our members to once again be the banker for this airline,” said Neville Hamilton, a spokesman for the International Association of Machinists and Aerospace Workers.

The opposition to rollbacks was not unanimous. The pilots’ union, for one, was recommending that its members support the restructuring plan. “When it comes right down to it,” said Michael Lynch of the Canadian Airline Pilots Association, “90 per cent is better than no per cent.”

In addition to pay cuts and flight-schedule changes that would see a reduction in domestic capacity and an increase in traffic to the United States and Asia, the company is asking American Airlines’ parent, AMR Corp.—-which bought a 25-per-cent voting interest in Canadian two years ago— to reduce the fees it charges the airline for management of computer systems and other services.

Canadian Auto Workers president Buzz Hargrove, meanwhile, said that his union, which represents 3,700 Canadian employees, may be willing to accept a change in federal rules on foreign investment so that AMR can increase its stake in Canadian Airlines—so long as that is part of a broader solution. It is not at all clear, however, that AMR itself favors that option.

MARY NEMETH