本文发表在 rolia.net 枫下论坛In 3 1/2 years as Air Canada's chief executive, Robert Milton piled on 35 percent more debt, alienated business travelers and waged a losing battle for discount fares, pushing the country's biggest airline into bankruptcy. Now, he's poised to remain in charge as it regains solvency.
Milton agreed on Saturday to sell 31 percent of Air Canada
to Victor Li, son of Hong Kong billionaire Li Ka-shing, for C$650
million ($490 million) the airline needs to exit bankruptcy. In
return, Milton and Executive Vice President Calin Rovinescu each
will receive 1 percent -- and Victor Li's backing.
Milton's plan to build a carrier that dominates both the
business and discount markets in Canada unraveled as corporate
customers cut travel expenses and WestJet Airlines Ltd. swayed
consumers with lower-priced tickets. Air Canada's decline cost
C$2.4 billion in market value and 12,000 of its 43,000 jobs.
``This company went bankrupt, and management of companies
that file for bankruptcy clearly have failed to do their jobs,''
said Barry Allan, who as president of Toronto's Marret Asset
Management Inc. helps oversee the equivalent of $260 million,
including some Air Canada bonds.
Marret and the airline's other creditors, with claims of C$8
billion to C$10 billion, will divide a 56 percent stake. Air
Canada's 10.25 percent bonds due in 2011 are trading at about 34
cents on the dollar, down from 37 last week.
`Full Confidence'
Milton, a Boston native who succeeded Lamar Durrett as CEO
in September 1999, picked Victor Li over Cerberus Capital
Management LP, a New York-based investment firm. The choice of
Li, a Canadian citizen, was approved by Air Canada's board.
Air Canada's agreement with Li's Trinity Time Investments
now goes before its creditors for approval. Ontario Superior
Court Justice James Farley, who granted the airline protection
from creditors on April 1, has the final say.
Victor Li had at least one incentive to keep Milton on:
Milton stood to receive severance of three years of salary and
performance bonuses if he were fired, or a total of at least C$3
million. He made C$1.07 million in 2002.
Canadian bankruptcy law also may have worked in Milton's
favor because it's designed to keep insolvent companies in
business. The country's Depression-era Companies' Creditors
Arrangement Act gives the presiding judge more discretion than in
U.S. proceedings to find a solution that satisfies all parties,
including management, said Keith Yamauchi, a University of
Calgary law professor who specializes in bankruptcies.
``We have full confidence in the company's senior management
team,'' Frank Sixt, finance director for Li Ka-shing's Hutchison
Whampoa Ltd., said in a statement on Victor Li's behalf. ``We
believe Air Canada is a solid platform and can successfully
emerge from the current process as an industry leader.''
One Percent
Air Canada fits the Li family's strategy of buying into
businesses that have fallen out of favor, such as Priceline.com
Inc. and Canada's Husky Oil Ltd., and holding them long enough to
turn a profit. Winson Fong, who helps manage the $2 billion at SG
Asset Management and holds Hutchison shares, said the family also
may be seeking a way to benefit when oil prices fall.
Milton said in the statement that Trinity and Cerberus made
offers that placed a similar value on Air Canada, and both
promised him and Rovinescu 1 percent stakes to ensure a ``long-
term commitment.'' The statement didn't say why the airline had
spurned Cerberus, and Milton declined to comment beyond it,
according to spokeswoman Angela Mah. Wendy Barnes, a spokeswoman
for Victor Li's Cheung Kong Holdings Ltd., also declined to
comment further.
``This situation of how much money senior executives get
will only make people have less confidence in the leadership,''
said spokesman Gary Fane of the Canadian Auto Workers, which
represents about 7,000 Air Canada ticket and reservation agents.
``The airline management isn't getting any better.''
Second Time Around
Milton, 43, and Rovinescu are betting that their strategy
can be profitable a second time around now that bankruptcy
protection has helped Air Canada cut costs by more than 20
percent and slash debt. To make it work, they're looking at
buying as many as 43 regional jetliners that seat 70 to 110
people and are cheaper to operate than Boeing Co. or Airbus SAS
planes.
Ben Cherniavsky, an analyst at Raymond James Financial Inc.
in Vancouver, said Air Canada still won't be able to compete
profitably with Calgary-based WestJet. WestJet CEO Clive Beddoe
cut his airline's costs 16 percent in the third quarter as it
benefited from owning new Boeing 737-700 jetliners that are more
efficient, and he, too, is looking at regional jets.
``They'll lose going head-to-head with us,'' Beddoe, who has
increased net income six years running as Air Canada amassed
C$1.14 billion in losses, said in an interview.
Canadian Purchase
Both airlines sell tickets between such cities as Calgary
and Toronto for as little as C$79, yet WestJet spends an average
of about 11 cents a mile flying each of its seats to Air Canada's
17 cents.
Milton's first misstep as CEO was acquiring rival Canadian
Airlines Corp. in 2000. He spent C$1.1 billion buying back shares
to defeat a hostile takeover bid for Air Canada, then he paid
C$92 million for Canadian, predicting the acquisition would
transform his airline into an ``international powerhouse.''
The purchase added C$630 million in long-term debt,
increasing Air Canada's interest costs. By August of the
following year the carrier was already in the process of cutting
10 percent of its workforce, after posting three quarterly losses
and forecasting two more.
Even before the Sept. 11 terrorist attacks sent the airline
industry into recession, Air Canada's stock had plunged to C$6.40
from a high of C$20.90 in May 2000.
`Broken Model'
Air Canada said in the statement that current shareholders
will get 0.01 percent of the company's new stock. The shares rose
12 cents to C$1.20 in 12:45 p.m. trading on the Toronto Stock
Exchange.
Creditors are increasing their interest to 56 percent by
agreeing to invest C$450 million for rights to acquire more
shares.
The sale will concentrate ownership of Air Canada in one
investor's hands for the first time in 14 years.
Air Canada, founded by the federal government as Trans-
Canada Air Lines in 1937, was sold to private investors in 1988
and 1989. It has reported losses in eight of the past 13 years,
including a C$428 million loss in 2002 on revenue of C$9.83
billion. Earnings peaked at C$427 million in 1997, when revenue
was C$5.57 billion.
Milton tried to turn Air Canada into a nimbler competitor to
WestJet at least twice before he placed it in court protection,
saying ``the business model is broken.'' In November 2001, he
formed the Tango brand, repainting 20 Air Canada jetliners and
cutting fares by as much as 80 percent to challenge WestJet and
Canada 3000 Inc.
Discount Strategy
Within two months, Air Canada drew a rebuke from Canada's
competition czar, who said Milton hastened Canada 3000's
bankruptcy by pricing Tango tickets too low. In December 2001,
the federal government put new competition rules in place
limiting Air Canada's ability to undercut its rivals. Air Canada
shut Tango last month.
In September 2002, the carrier started a second discounter,
Zip, seeking to match WestJet's low costs by founding an entirely
new airline unbound by Air Canada's old labor contracts.
``Air Canada's plan has always been to kill all competitors,
thinking that if they had the whole market to themselves they
would be profitable,'' said Jacques Kavafian, an analyst at
Octagon Capital Corp. in Toronto who has covered Air Canada for
13 years.
To reduce debt, Milton offered to find a buyer for regional
airline Jazz, agreed to sell 35 percent of Air Canada's frequent-
flier program for C$245 million and put the airline's maintenance
and baggage-handling units on the block. All of those plans were
suspended when the company filed for protection from creditors
with long-term debt of about C$4.3 billion.
12,000 Jobs
Milton cut 6,000 jobs as he strove to avoid bankruptcy and
has eliminated almost 6,000 more since the April filing. He also
agreed to a 15 percent pay cut.
Marret's Allan said he gives Milton ``credit'' for choosing
court protection over a government bailout that could have
burdened the airline with restrictions on job cuts.
So far, Milton's strategy to revive Air Canada has won few
converts, and some of his plans have run into obstacles.
Documentary Films
Customers were so offended by cost-cutting attempts such as
showing documentary films on cattle ranching and offshore oil
exploration instead of recent movies that Milton himself said in
March 2002 that Air Canada went too far.
The company's share of Canada's air-travel market has
slumped to about 65 percent from 80 percent when it bought
Canadian, according to Cherniavsky. WestJet has grabbed about 24
percent since it began flying in 1996.
In June, Milton faced a possible shutdown of Air Canada when
pilots rejected his contract offer and negotiations went past
deadline. Labor relations are still rocky: Two weeks ago,
ticketing agents in Toronto threatened a wildcat strike over the
possibility that Air Canada will rescind an earlier pledge not to
revise its pension plan.
``We had a clear understanding that pensions wouldn't be
touched,'' said President Buzz Hargrove of the Canadian Auto
Workers, which represents about 7,000 Air Canada agents. ``We
have a real problem in terms of trust.''
`Mind-Boggling'
The agreement with Victor Li is conditional on Air Canada
resolving the dispute over funding the pension plan's deficit of
C$1.5 billion.
Analyst Kavafian said Air Canada can succeed only by giving
up on Milton's vision of a cross-Canada carrier and ceding
shorter routes such as Montreal-Quebec City to WestJet and
newcomer Jetsgo to focus on Canada's seven top markets and
international travel.
``It's mind-boggling that they still insist on going to
these cities,'' said Kavafian. ``The investor in Air Canada will
lose a lot of money.''更多精彩文章及讨论，请光临枫下论坛 rolia.net
Milton agreed on Saturday to sell 31 percent of Air Canada
to Victor Li, son of Hong Kong billionaire Li Ka-shing, for C$650
million ($490 million) the airline needs to exit bankruptcy. In
return, Milton and Executive Vice President Calin Rovinescu each
will receive 1 percent -- and Victor Li's backing.
Milton's plan to build a carrier that dominates both the
business and discount markets in Canada unraveled as corporate
customers cut travel expenses and WestJet Airlines Ltd. swayed
consumers with lower-priced tickets. Air Canada's decline cost
C$2.4 billion in market value and 12,000 of its 43,000 jobs.
``This company went bankrupt, and management of companies
that file for bankruptcy clearly have failed to do their jobs,''
said Barry Allan, who as president of Toronto's Marret Asset
Management Inc. helps oversee the equivalent of $260 million,
including some Air Canada bonds.
Marret and the airline's other creditors, with claims of C$8
billion to C$10 billion, will divide a 56 percent stake. Air
Canada's 10.25 percent bonds due in 2011 are trading at about 34
cents on the dollar, down from 37 last week.
`Full Confidence'
Milton, a Boston native who succeeded Lamar Durrett as CEO
in September 1999, picked Victor Li over Cerberus Capital
Management LP, a New York-based investment firm. The choice of
Li, a Canadian citizen, was approved by Air Canada's board.
Air Canada's agreement with Li's Trinity Time Investments
now goes before its creditors for approval. Ontario Superior
Court Justice James Farley, who granted the airline protection
from creditors on April 1, has the final say.
Victor Li had at least one incentive to keep Milton on:
Milton stood to receive severance of three years of salary and
performance bonuses if he were fired, or a total of at least C$3
million. He made C$1.07 million in 2002.
Canadian bankruptcy law also may have worked in Milton's
favor because it's designed to keep insolvent companies in
business. The country's Depression-era Companies' Creditors
Arrangement Act gives the presiding judge more discretion than in
U.S. proceedings to find a solution that satisfies all parties,
including management, said Keith Yamauchi, a University of
Calgary law professor who specializes in bankruptcies.
``We have full confidence in the company's senior management
team,'' Frank Sixt, finance director for Li Ka-shing's Hutchison
Whampoa Ltd., said in a statement on Victor Li's behalf. ``We
believe Air Canada is a solid platform and can successfully
emerge from the current process as an industry leader.''
One Percent
Air Canada fits the Li family's strategy of buying into
businesses that have fallen out of favor, such as Priceline.com
Inc. and Canada's Husky Oil Ltd., and holding them long enough to
turn a profit. Winson Fong, who helps manage the $2 billion at SG
Asset Management and holds Hutchison shares, said the family also
may be seeking a way to benefit when oil prices fall.
Milton said in the statement that Trinity and Cerberus made
offers that placed a similar value on Air Canada, and both
promised him and Rovinescu 1 percent stakes to ensure a ``long-
term commitment.'' The statement didn't say why the airline had
spurned Cerberus, and Milton declined to comment beyond it,
according to spokeswoman Angela Mah. Wendy Barnes, a spokeswoman
for Victor Li's Cheung Kong Holdings Ltd., also declined to
comment further.
``This situation of how much money senior executives get
will only make people have less confidence in the leadership,''
said spokesman Gary Fane of the Canadian Auto Workers, which
represents about 7,000 Air Canada ticket and reservation agents.
``The airline management isn't getting any better.''
Second Time Around
Milton, 43, and Rovinescu are betting that their strategy
can be profitable a second time around now that bankruptcy
protection has helped Air Canada cut costs by more than 20
percent and slash debt. To make it work, they're looking at
buying as many as 43 regional jetliners that seat 70 to 110
people and are cheaper to operate than Boeing Co. or Airbus SAS
planes.
Ben Cherniavsky, an analyst at Raymond James Financial Inc.
in Vancouver, said Air Canada still won't be able to compete
profitably with Calgary-based WestJet. WestJet CEO Clive Beddoe
cut his airline's costs 16 percent in the third quarter as it
benefited from owning new Boeing 737-700 jetliners that are more
efficient, and he, too, is looking at regional jets.
``They'll lose going head-to-head with us,'' Beddoe, who has
increased net income six years running as Air Canada amassed
C$1.14 billion in losses, said in an interview.
Canadian Purchase
Both airlines sell tickets between such cities as Calgary
and Toronto for as little as C$79, yet WestJet spends an average
of about 11 cents a mile flying each of its seats to Air Canada's
17 cents.
Milton's first misstep as CEO was acquiring rival Canadian
Airlines Corp. in 2000. He spent C$1.1 billion buying back shares
to defeat a hostile takeover bid for Air Canada, then he paid
C$92 million for Canadian, predicting the acquisition would
transform his airline into an ``international powerhouse.''
The purchase added C$630 million in long-term debt,
increasing Air Canada's interest costs. By August of the
following year the carrier was already in the process of cutting
10 percent of its workforce, after posting three quarterly losses
and forecasting two more.
Even before the Sept. 11 terrorist attacks sent the airline
industry into recession, Air Canada's stock had plunged to C$6.40
from a high of C$20.90 in May 2000.
`Broken Model'
Air Canada said in the statement that current shareholders
will get 0.01 percent of the company's new stock. The shares rose
12 cents to C$1.20 in 12:45 p.m. trading on the Toronto Stock
Exchange.
Creditors are increasing their interest to 56 percent by
agreeing to invest C$450 million for rights to acquire more
shares.
The sale will concentrate ownership of Air Canada in one
investor's hands for the first time in 14 years.
Air Canada, founded by the federal government as Trans-
Canada Air Lines in 1937, was sold to private investors in 1988
and 1989. It has reported losses in eight of the past 13 years,
including a C$428 million loss in 2002 on revenue of C$9.83
billion. Earnings peaked at C$427 million in 1997, when revenue
was C$5.57 billion.
Milton tried to turn Air Canada into a nimbler competitor to
WestJet at least twice before he placed it in court protection,
saying ``the business model is broken.'' In November 2001, he
formed the Tango brand, repainting 20 Air Canada jetliners and
cutting fares by as much as 80 percent to challenge WestJet and
Canada 3000 Inc.
Discount Strategy
Within two months, Air Canada drew a rebuke from Canada's
competition czar, who said Milton hastened Canada 3000's
bankruptcy by pricing Tango tickets too low. In December 2001,
the federal government put new competition rules in place
limiting Air Canada's ability to undercut its rivals. Air Canada
shut Tango last month.
In September 2002, the carrier started a second discounter,
Zip, seeking to match WestJet's low costs by founding an entirely
new airline unbound by Air Canada's old labor contracts.
``Air Canada's plan has always been to kill all competitors,
thinking that if they had the whole market to themselves they
would be profitable,'' said Jacques Kavafian, an analyst at
Octagon Capital Corp. in Toronto who has covered Air Canada for
13 years.
To reduce debt, Milton offered to find a buyer for regional
airline Jazz, agreed to sell 35 percent of Air Canada's frequent-
flier program for C$245 million and put the airline's maintenance
and baggage-handling units on the block. All of those plans were
suspended when the company filed for protection from creditors
with long-term debt of about C$4.3 billion.
12,000 Jobs
Milton cut 6,000 jobs as he strove to avoid bankruptcy and
has eliminated almost 6,000 more since the April filing. He also
agreed to a 15 percent pay cut.
Marret's Allan said he gives Milton ``credit'' for choosing
court protection over a government bailout that could have
burdened the airline with restrictions on job cuts.
So far, Milton's strategy to revive Air Canada has won few
converts, and some of his plans have run into obstacles.
Documentary Films
Customers were so offended by cost-cutting attempts such as
showing documentary films on cattle ranching and offshore oil
exploration instead of recent movies that Milton himself said in
March 2002 that Air Canada went too far.
The company's share of Canada's air-travel market has
slumped to about 65 percent from 80 percent when it bought
Canadian, according to Cherniavsky. WestJet has grabbed about 24
percent since it began flying in 1996.
In June, Milton faced a possible shutdown of Air Canada when
pilots rejected his contract offer and negotiations went past
deadline. Labor relations are still rocky: Two weeks ago,
ticketing agents in Toronto threatened a wildcat strike over the
possibility that Air Canada will rescind an earlier pledge not to
revise its pension plan.
``We had a clear understanding that pensions wouldn't be
touched,'' said President Buzz Hargrove of the Canadian Auto
Workers, which represents about 7,000 Air Canada agents. ``We
have a real problem in terms of trust.''
`Mind-Boggling'
The agreement with Victor Li is conditional on Air Canada
resolving the dispute over funding the pension plan's deficit of
C$1.5 billion.
Analyst Kavafian said Air Canada can succeed only by giving
up on Milton's vision of a cross-Canada carrier and ceding
shorter routes such as Montreal-Quebec City to WestJet and
newcomer Jetsgo to focus on Canada's seven top markets and
international travel.
``It's mind-boggling that they still insist on going to
these cities,'' said Kavafian. ``The investor in Air Canada will
lose a lot of money.''更多精彩文章及讨论，请光临枫下论坛 rolia.net