BUSINESS

Aveos Layoffs: Air Canada Maintenance Contractor Liquidates, Lays Off Entire Staff

03/20/2012 11:40 EDT | Updated 05/20/2012 05:12 EDT
CP
MONTREAL - Aveos Fleet Performance is liquidating its Canadian aircraft maintenance business, putting virtually all of the company's 2,600 employees across the country out of work.

The Montreal-based private company said Tuesday that it would immediately cease all operations after getting permission for the move in Quebec Superior Court.

The company let go its remaining 1,300 employees after 1,175 workers were put out of a job on Sunday when Aveos decided to close its airframe repair business.

About 160 employees will remain to oversee the liquidation process.

"The company had no viable option but to cease operations," said chairman Eugene Davis.

"We deeply regret the job losses and the impact this decision has on our employees in Canada and extend our sincere gratitude to them for their dedication and service over the years."

Neither company nor union officials could provide details regarding the employees access to severance payments or the impact on their pensions.

Aveos said Air Canada's $15-million financial pledge late Monday "following months of protracted negotiations" did not address its challenges and was unacceptable to the company and its secured lenders.

Air Canada (TSX:AC.B) accounted for about 90 per cent of its work.

Air Canada said in a release it was disappointed Aveos rejected its offer of emergency financing.

It said the money would have allowed Aveos to reopen some of its facilities and recall some employees, which would have enabled Air Canada to provide additional maintenance work to Aveos.

"Air Canada believes that Aveos has failed to act in the interests of its employees, customers and other stakeholders by abruptly abandoning its business while other viable options to closure were available," the airline said.

"Management at Aveos has failed repeatedly to attract new business to expand and diversify its revenue stream. By its own admission in court filings, the company is not cost competitive and has suffered operating losses for several years."

Air Canada will be activating a contingency plan to make sure maintenance work on its planes continues and that customers are not inconvenienced.

Air Canada said Aveos owes it $35 million.

It warned in court Monday that 3,000 passengers could be stranded daily if Aveos didn't complete the work on some of its planes.

The airline said that three wide-body planes and several narrow-body aircraft were sitting in Aveos facilities across the country, some missing landing gear.

Aveos shut down three main plants in Vancouver, Winnipeg and Montreal, as well as other facilities in Edmonton, Calgary, Trenton and Mississauga, Ont.

The International Association of Machinists and Aerospace Workers said it was outraged by the sudden job loss.

"We're extremely disappointed and we're devastated for these people and we're asking where is the federal government," spokesman Bill Trbovich said in an interview.

He said the Harper government used the pretext of health and safety to prevent Air Canada workers from going on strike, but has been unwilling to help workers who are now unemployed.

The move to liquidate came a day after the court placed Aveos under the Companies' Creditors Arrangement Act.

Aveos sought court protection from its creditors after Air Canada "reduced, deferred, and cancelled maintenance work," costing the company about $16 million in lost revenue in less than two months.

"While Aveos remained ready, willing and able to perform such work, such work did not materialize," the company said. "This was a devastating blow to Aveos."

The announcement Tuesday came on a testy day for the laid-off workers.

Some workers blocked the street outside the company's Montreal offices and tossed snowballs, rocks and pieces of wood at riot police when officers moved in.

"After police received a couple of rocks, we sprayed one shot of CS gas to back off the protesters," Const. Daniel Lacoursiere said.

Police then backed off and the protesters left on their own soon after.

Under a court order, laid-off Aveos workers cannot impede access to the company's facilities anywhere in Canada, but protesters said they'll take their message to the provincial legislature Wednesday.

The federal government has said it won't intervene in the issue, calling it a private business decision.

But the Quebec government appeared to be assessing the grounds for a lawsuit under the terms of the legislation that transformed Air Canada from a Crown corporation into a private company in 1988.

The union has said the Air Canada Public Participation Act requires the airline to maintain heavy maintenance facilities or have such work performed at facilities in Winnipeg, Mississauga and Montreal.

"We're looking at the possibility of suing Air Canada in the hope of forcing Air Canada to sub-contract with that company and bringing back the workers," Economic Development Minister Sam Hamad told the legislature.

Aveos was once Air Canada's technical services division, but was spun off in 2007 as a separate company. A recapitalization in 2010 left the airline with a $50 million stake in Aveos that will now be written off.

In 2007, Aveos acquired an 80 per cent stake in Aeroman, the aircraft repair affiliate of Taca Airlines, one of Central America's largest airlines. It operates in El Salvador where it does work for airlines such as discount carrier JetBlue.

Union spokesman Marcel St-Jean said Tuesday that laid-off employees are upset that they've been denied access to their former workplace to pick up their tools.

"The employees are as angry as ever, they feel abused and they don't have answers to their questions," St-Jean said in an interview. "My people need to go get their tools if they want to work again and they won't let them go in to get them."

On their website, Aveos mapped out a schedule for employees seeking to pick up their equipment or looking for other information. A similar process will apply to other employees who have been terminated.

Also on HuffPost

Air Canada's Labour Problems