Nov. 9, 07:41 EDT Canada 3000 shuts down

50,000 passengers stranded, 4,800 workers lose jobs

Susan Pigg Business reporter

Some 50,000 travellers find themselves stranded around the world today with the shocking news that Canada 3000 — the country's second-biggest airline — has shut down operations as of noon today.

The surprise decision, which will put 4,800 people out of work, was made by the board of the beleaguered airline last night, just hours after the Toronto-based airline won interim protection from its creditors.

The discount carrier started out more than 12 years ago winging vacationers to resorts in Florida and the Caribbean. But it had become a major competitor to giant Air Canada earlier this year when it bought up Montreal-based Royal Airlines and Halifax-based CanJet Airlines.

There had been rumours that the board of Canada 3000, which had been losing $700,000 a day in the aftermath of the Sept. 11 terrorist attacks, was deeply split on how long, or even if, it could keep the airline flying to its 108 destinations.

Those rumours were confirmed late last night when the company issued a terse, three-sentence statement saying all operations would be shut down immediately.

Passengers are being left to find their own way home from destinations as far away as London, Florida, Sydney, Delhi, Ancorage and the Carribbean.

Those numbers could well exceed 50,000 based on recent passenger loads for the 38-plane carrier.

The bombshell announcement is expected to send shockwaves through Canada's fragile airline industry which has been struggling to climb above the turbulence created by soaring gas prices, followed by a severe downturn in business travel and then the devastating fallout of the terrorist air attacks.

Yesterday, after tense negotiations with its unions to cut hundreds of jobs broke down, the airline sought protection under the Companies' Creditors Arrangements Act — commonly called CCAA.

The country's second-biggest airline has $45 million in overdue bills — much of that in aircraft leases — and would have been out of cash next week.

The airline had been seeking similar court protection in the United States to prevent jittery creditors from seizing aircraft and other vital equipment at airports it flies into — moves that could have shut the cash-strapped carrier down.

The Toronto-based charter and scheduled carrier has seen bookings and revenues plummet 30 per cent since the Sept. 11 terrorist attacks and hadn't expected much improvement before next summer, according to financial documents presented to a court yesterday.

In fact, the falling dollar was expected to further jeopardize the demand for leisure travel on which Canada 3000 is highly dependent, it says.

"Delays in securing concessions essential to our restructuring have prompted the decision to seek the protection of the court. This step allows us to continue serving the travelling public while restructuring our operations to ensure the long-term viability of Canada 3000," president Angus Kinnear said in a statement released yesterday.

Lecky had said the company was "confident" it could meet Ottawa's conditions for the loan guarantees.

"We are working with stakeholders to resolve the challenges facing the company. We are encouraged and gratified by discussions to date with its creditors and unions and are confident our restructuring effort will be successful," said Lecky.

Ottawa had said it was willing to provide the loan guarantee if Canada 3000 could provide a viable business plan, Transport Minister David Collenette said yesterday.

"I am told by the company that their planes are still flying, that people are still booking. In fact, they have an incredible number of people that have already bought packages for holidays and paid for tickets. They tell me that operations are going on as scheduled.''

Asked if the conditions the federal government had attached to possible loan guarantees are too tough, Collenette said taxpayers have to be protected.

"We have an obligation to the taxpayers that, if we are going to be on the hook for a loan, we better make sure that the company that is receiving the money is making best efforts to be viable. We don't want that loan guarantee to be called.''

Hopes of winning those loan guarantees had looked bleak yesterday morning after talks with the union for Canada 3000's 1,500 flight attendants broke down.

Denis Ellickson, a lawyer for the Canadian Union of Public Employees, accused the company of sabotaging its around-the-clock labour negotiations.

It was thought the company sought to immediately lay off 500 flight attendants to help it meet Ottawa's conditions for the loan guarantees and possibly avoid the need for bankruptcy protection.

But the documents filed for the CCAA hearing suggested the company had intended to seek that protection all along, Ellickson said.

"It was a show and it was a pretense," he said of the 21 straight hours of talks — so intense that, at some point, every one of the 12 CUPE negotiators had broken down in tears of frustration and exhaustion.

"It's been in the works (preparations for yesterday's CCAA hearing) for at least 48 to 72 hours, I would estimate."

That realization devastated representatives of the flight attendants who said they had met all the company's demands overnight, until company lawyer Bill Phelps shocked them by rushing into the room about 7:30 a.m. with three new demands from Kinnear.

They would have acknowledged Kinnear as the "supreme being," said one union official, allowing the company to lay off flight attendants immediately without even the minimum notice or pay required by law, extend the list of casualties beyond the 500 any time they wanted and refuse a guarantee of job protection for the survivors.

It became clear more negotiation would be needed. But not long afterwards, Phelps headed to nearby Pearson Airport to catch a plane and resume his vacation.

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-- Martin Thompson (mthom1927@aol.com), November 09, 2001

Answers

With occurrences like this, is it no wonder people seek to minimize air travel? The incidence of waits, delay, inconvenience, and disruption is greatly increased. "Pleasure" Travel isn't rational under these conditions.

-- Robert Riggs (rxr.999@worldnet.att.net), November 09, 2001.