03/29/2012 09:46 EDT | Updated 05/29/2012 05:12 EDT

Air Canada: Aveos Jobs Should Stay In Canada, CEO Says


Air Canada's chief executive says the carrier can't be blamed for the demise of maintenance firm Aveos Fleet Performance and he hopes other companies will step in to hire its terminated workers.

Calin Rovinescu told a parliamentary committee on Thursday that the heavy maintenance company — formerly a division of Air Canada — failed because it was unable to attract additional customers to diversify its revenue stream.

The country's largest air carrier spent $440 million with Aveos in the 14 months before it closed, providing 91 per cent of its work to the privately owned supplier.

Despite being owed $35 million by Aveos, Air Canada offered $15 million in emergency funding to help its former subsidiary through a court-supervised restructuring.

Rovinescu said Aveos suffered operating losses for years because of a high cost structure and an inability to be cost competitive.

"Ultimately, their unfortunate decision to terminate operations is symptomatic of those failures and not the result of any action taken or not taken by Air Canada," he told the Commons standing committee on transportation, infrastructure and communities hearing in Ottawa.

After the demise of Aveos this month, the airline sent planes to companies in Canada and the United States, including several to two Quebec repair companies.

It has also had preliminary discussions with several Canadian and foreign maintenance, repair and overhaul companies about opportunities inside the country.

Air Canada (TSX:AC.B) said there is a large pool of skilled talent that could be hired at facilities in Montreal, Winnipeg, Toronto and Vancouver. It urged provincial governments to help entice potential Aveos successors.

The airline said it will favour overhaul companies that keep the work in Canada and employ the skills of Canadian aviation technicians.

"The priority for us is to find local suppliers, to find global players who are interested in investing in these Canadian facilities, in these Canadian workers to continue the work in Canada," added chief operating officer Duncan Dee.

"It is not an intent of Air Canada to be sending our aircraft overseas to other places, because that's frankly an added burden on Air Canada to have to send aircraft to places to which we don't fly."

Rovinescu said he has "tremendous sympathy" for 2,600 workers who lost their jobs when Aveos abruptly closed and moved to liquidate nearly two weeks ago.

But he added the airline is fully compliant with the Air Canada Participation Act, the legislation introduced when it became a private company, because it operates its own maintenance work in the country.

"We continue to be in full compliance with the letter and the spirit of that act despite the demise of Aveos," Rovinescu said to the disbelief of some committee members who criticized him for receiving a $5-million retention bonus.

The airline expects to hire more mechanics itself but has no plans to reintegrate the employees from its former maintenance division, which was spun off in 2007, he said a day after meeting with Transport Minister Denis Lebel.

Aveos employees contend that legislation compels the airline to keep maintenance jobs in Canada. The law doesn't say who has to do the work.

The Justice Department has urged the government not to charge Air Canada.

"It is far from clear that Air Canada is in breach of its articles even though Aveos no longer provides services to Air Canada under its contracts," said a six-page legal opinion from assistant deputy minister Pierre Legault.

Part of the difficulty in proving such a case is the requirement for Air Canada to maintain "overhaul" operations, he wrote. The term can be used to apply to both heavy maintenance work done by Aveos and line maintenance performed internally by the airline's own 2,400 mechanical employees.

Even if the government was able to obtain an order against Air Canada, Aveos workers may not get their jobs back because the airline could still contract out the work, Legault said.

He added that any effort to amend the act requiring the airline to perform all maintenance and overall work in Canada would likely raise trade issues and could run afoul of NAFTA and a bilateral trade agreement with the U.S.

Opposition members of the committee accused Air Canada of "shafting" workers by its actions over more than a decade, including the decision to sell its heavy maintenance business and push employees nearly a year ago to Aveos.

"This is an act of betrayal because that's how the workers are feeling right now," said NDP member Olivia Chow.

The Conservative majority rejected an opposition motion to summon Aveos CEO Joe Kolshak to appear before the committee. The company has refused to testify and explain how its business deteriorated so much.

Pierre Poilievre, parliamentary secretary to the transport minister, said the government has sympathy for the plight of Aveos workers but has no intention of providing a bailout to a company that he said burned through $1 billion over five years and still went bankrupt.

"To pull $1 billion out of the economy to fund such a bailout would kill far more jobs than it would create."

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