MONTREAL - Hope appears to be fading for most former Aveos employees after no potential buyers expressed interest in the aircraft maintenance firm's airframe unit, says a report by the monitor overseeing the company's restructuring.
The business employed about 1,500 of the 2,600 people who worked at Aveos before it closed its operations in March and obtained court protection from creditors under the Companies' Creditors Arrangement Act.
Work on repairing and overhauling airframes has increasingly gone to low-cost operations in Asia, Latin America and elsewhere.
Aveos has said that its airframe business was not viable, suggesting the most buyer interest will be focused on the components and engine repair divisions.
Air Canada (TSX:AC.B) has reached an agreement with Aveos Fleet Performance Inc. that could facilitate the sale of those two divisions, according to a June 5 report from FTI Consulting Canada Inc, the court-appointed monitor assisting with the Aveos restructuring.
The airline had earlier filed a motion last month to terminate contracts with its former subsidiary, but later withdrew the effort and agreed to continue negotiations.
"The Air Canada agreement results in a higher probability that both the engines and components business will be sold to a party that can restart operations as it will have the support of Air Canada, Aveos' largest customer," wrote Greg Watson and Toni Vanderlaan of FTI Consulting.
However, they cautioned there are still many risks with the sale.
Union representative Jean Poirier said Air Canada's move is good, but it doesn't guarantee that engine and component work will return. And there's also nothing positive for the airframe segment.
"If Air Canada has backed down to guarantee contracts for engines and components, it's good news, but you really have to see which contracts they will send (through)," he said in an interview.
About 500 former employees in Montreal have found jobs at Bombardier, CAE, Hydro-Quebec and in construction, but most are unemployed, Poirier said.
The union has accused the Conservatives of conspiring with Air Canada by not enforcing a law they say requires heavy maintenance work to be done in Canada.
Air Canada has said it fulfills the requirements of the Air Canada Participation Act by employing 2,400 employees to do maintenance work in Montreal, Toronto, Vancouver and Winnipeg.
The airline declined to provide details about the agreement with Aveos, which it says is confidential.
"We have provided arrangements that will assist Aveos's chief restructuring officer in finding potential purchasers for the engine and component business," spokeswoman Isabelle Arthur said in an email.
The Air Canada and Aveos agreement includes a new exclusive contract through 2018 for the engine business, which will be offered for sale along with the engines facility.
"Air Canada has agreed to provide its support and consent to the assignment of the new engines contract, so long as the successful purchaser meets Air Canada's requirements," said the monitor.
Canada's largest carrier also agreed to conduct a request for proposals for about 1,000 component parts serviced by Aveos. Work on the five- to 10-year contract must be done at Aveos's facility.
Air Canada will provide Aveos with the result of its process by July 11, while Aveos continues to try to sell the components facility.
The monitor didn't provide any details about the first phase of bidding, which ended Wednesday for all but the components part of Aveos' operations. The first deadline for the components business is next Wednesday.
German-based Lufthansa Tecknik was expected to be among the leading bidders. The company's subsidiaries employ 26,500 workers and serve 750 clients around the world.
The Quebec government has signalled its willingness to provide financial support to potential buyers as long as they develop viable businesses that sustain jobs in Montreal.
Note to readers: This is a corrected story. A previous version spelled Vanderlaan's first name 'Tony'