For the first time since Onex/AMR launched their hostile and illegal takeover bid two months ago, Air Canada and its shareholders have learned of the onerous extent and punitive nature of the lock-up agreements among Onex, AMR and Canadian Airlines - purportedly negotiated on behalf of Air Canada and its shareholders. Air Canada had applied to the Alberta, British Columbia, Ontario and Quebec securities commissions to compel Onex to disclose specific information on various matters regarding its hostile takeover bid.
“I have no doubt that, had we not taken action with the securities commissions, Onex would never have started to level with our shareholders about the more than $1.3 billion in penalties included in its lock-up with AMR,” said Robert Milton, Air Canada`s President and CEO. “As recently as Friday, an Onex spokesman claimed they had already made full disclosure in their original offer. Clearly that was not the case.”
Under the agreement between AirCo and AMR, AirCo has entered into commercial alliance agreements with AMR`s subsidiary American Airlines under which default would result in a $740 million (US$500 million) penalty. Further, the agreement between AirCo and AMR with respect to the use of services provided by Sabre would force the new merged airline to purchase Sabre services or pay a $525 million (US$356 million) penalty to complete a merger with Canadian.
“It would seem their huge penalties were designed to justify the sweetheart financing Onex is receiving from AMR,” said Mr. Milton.
“On Thursday, Onex stated that Air Canada`s management would have the freedom to choose Sabre as its information technology supplier,” continued Mr. Milton. “Yesterday we learned that this so-called freedom is attached to a $525 million penalty. Air Canada shareholders must wonder how many more secret deals have been made between Onex and AMR to bring Air Canada under the wing of American Airlines.
“These staggering penalties negotiated by Onex, which has no airline operating experience, with its partner AMR, stand in stark contrast to the arrangements negotiated by Air Canada in arms length negotiations with Star Alliance partners,” remarked Mr. Milton. “Our arrangements, which actually surface hundreds of millions of dollars for all of our shareholders, do so with a superior alliance.”
Air Canada`s proposal provides:
$800 million in immediate cash to shareholders with no added debt (Onex offers $752 million net cash and increased leverage);
90 percent ownership, fully diluted (Onex offers 59 percent, fully diluted); and
$1 billion operating income over 10 years through Star Alliance, the world`s largest and most comprehensive alliance, that would not be captured under the Oneworld alliance.
In addition, the Air Canada plan would operate Canadian Airlines as a separate and distinct brand. It has committed to unleashing the potential of Canadian Airlines never achieved under American`s control and to bring it to sustainable profitability without any forced layoffs at either Canadian or Air Canada.
Further, Air Canada has announced the introduction of a new low-fare carrier based in Hamilton, offering Canadian travelers in Eastern and Central Canada access to a low-fare service not currently available.