Aveos Fleet Performance Blames Inconsistency Of Work From Air Canada

Canadian MRP provider Aveos has initiated proceedings under the Companies' Creditors Arrangement Act (CCAA) in Canada. As of March 18, 2012, Aveos ceased its Airframe maintenance service operations and will make decisions with respect to its other operations as it seeks Court protection to allow it a period of time to assess its options. Aveos employs approximately 2,600 employees across Canada.

"This was an extremely difficult decision, one we made only after lengthy and careful consideration of all other options. We deeply regret the job losses and the impact this decision has on our employees in Canada," said Joe Kolshak, President and Chief Executive Officer, Aveos Fleet Performance.

In a news release, the company said it was forced to file CCAA proceedings, in part, due to uncertain work volume across its business lines from Aveos' principal customer, Air Canada. Since the beginning of the year, its principal customer reduced, deferred, and cancelled maintenance work, which resulted in approximately $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. This has been a devastating blow to Aveos, which contributed to the company needing to file for CCAA protection.

FTI Consulting Canada has been appointed to direct and supervise the CCAA process as Court-appointed monitor.

In its own release, Air Canada said that it was disappointed at Aveos Aveos' decision to reject its offer of $15 million in emergency financing and instead permanently cease operations. "If accepted, the $15 million Debtor-in-Possession (DIP) financing could have assisted in stabilizing Aveos for the benefit of its employees and stakeholders and supported an orderly restructuring. This stabilization would have permitted Aveos to reopen certain of its facilities and recall certain of its employees, which would have in turn allowed Air Canada to provide additional maintenance work to Aveos," the airline said.

The airline has activated its contingency plan it says will ensure that maintenance work continues in full compliance with all regulatory requirements and is consistent with the high standards of Air Canada's maintenance programs.

Air Canada said it 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.  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.

Aveos claims that Air Canada has withheld or directed elsewhere maintenance work it should have properly received. Since the beginning of 2011, Air Canada has undertaken 135 airframe checks and Aveos performed 123, or 91 per cent of them. As well, Aveos performed 52 of 56, or 93 per cent, of engine checks performed for Air Canada. Work was sent to third parties only when Aveos was unable to perform it and only in accordance with the terms of the commercial agreements between the parties and the applicable collective agreements.

Contrary to Aveos's court filings and public statements, Air Canada claims it has been very supportive of Aveos and has provided financial and other assistance to the company.

FMI: www.aveos.com, www.aircanada.com