Air Canada Wins Fight Over Pearson International Airport Gates

Air Canada Wins Fight Over Airport Gates
The Globe and Mail, Canada 

Tuesday, February 24, 2004  

   
Air Canada has won a court fight over airport gates,
in effect shutting out key domestic rival WestJet
Airlines Ltd. from a $3.6-billion new terminal at
Toronto's Pearson International Airport for the time
being.

The victory came as, on another front, Air Canada and
would-be major shareholder Trinity Time Investments
Ltd. launched what appears to be a co-ordinated
assault designed to bypass the airline's unions and
directly woo employees into accepting controversial
changes in their pension plan, with Trinity for the
first time indicating it might agree to make the
changes voluntary.

In a decision released yesterday, Mr. Justice James
Farley of the Ontario Superior Court ruled that the
Greater Toronto Airports Authority must live up to a
commitment and give Air Canada preferential use of all
14 "contact" or covered gates that will become
available when the first phase of the new terminal
opens April 6.

In a complaint filed with the court on Feb. 5, Air
Canada alleged that the GTAA had reneged on this
commitment by deciding to give it exclusive use of
only six of these gates and making it share the other
eight with Calgary-based WestJet.

Air Canada contended that the GTAA's decision would
prevent it from consolidating domestic operations in
one terminal, which would cost it $64-million in lost
revenue and threaten its ability to complete its
restructuring. A lawyer for the airline warned Judge
Farley at a hearing last week that "it would be
devastating for Air Canada if we lose this motion."

The GTAA argued, however, that it had not promised Air
Canada excusive use of the 14 contact gates and also
that the carrier had not indicated that it planned to
run its entire domestic schedule from the new terminal
until it learned that WestJet was about to shift many
of its flights there from another Pearson terminal
and, more important, from the airport in Hamilton.

Air Canada welcomed Judge Farley's ruling. "We are
very pleased that the court has confirmed the terms of
our agreement on our relocation to the new terminal at
Pearson," Montie Brewer, an executive vice-president
of the airline, said in the statement, adding that the
airline "can proceed with its restructuring plan."

GTAA spokesman Steve Shaw said the authority wants to
study the lengthy ruling before commenting. "It takes
a lot of time to say a lot of things and I think we
need time to review it before we make any further
comments," he said.

WestJet spokeswoman Siobhan Vinish also declined to
discuss the decision beyond saying the company is
reviewing it and will comment further when it has "a
clear picture of what this means for WestJet."

She did add, however, that the decision will not
affect the company's current smaller schedule of
Toronto flights, which operate from another terminal.

Analyst Ben Cherniavsky of investment dealer Raymond
James Ltd. in Vancouver said the court decision could
have a significant impact on WestJet unless it can
gain access to a comparable number of gates at another
terminal at Pearson. "The market seemed to make a big
deal out of their moving into Toronto," he said.
Whether the company will still be able to get the
capacity it needs "to be a contender in the Toronto
airport" is an issue it will have to deal with, he
added.

WetJet's shares closed on the Toronto Stock Exchange
yesterday at $26.72 apiece, down 41 cents.

Relations between the GTAA and Air Canada have been
poisonous in the past couple of years. The airport
authority's chief executive officer Louis Turpen has
accused Air Canada chief Robert Milton of spearheading
an international campaign against double-digit annual
fee increases the GTAA has imposed to pay for its
renovations, which are budgeted at $4.4-billion in
all.

Judge Farley noted this in his handwritten 29-page
ruling. "I regret to say that I think it a fair
observation here that trust and respect does not flow
in either direction between [Air Canada] and the
authority," he wrote. 

When Phase 1 opens, the new terminal will also have
nine outdoor gates, while in 18 months the number of
contact gates will rise to 18. When the entire
terminal is completed, there will be 45 contact gates
in all and 11outdoor gates.

On the pensions front, meanwhile, Air Canada issued a
bulletin -- unsigned --to employees yesterday asking
them to cast a vote by e-mail as to whether they want
to be allowed to choose between a defined-benefit
pension plan -- which is what they currently have --
and a defined-contribution plan, which Trinity has
been demanding for all employees with fewer than 60
years combined age and service.

The unsigned bulletin came four days after Mr. Milton
wrote directly to staff saying he had proposed that
Trinity allow employees to choose between the two
types of plan.

Also yesterday, Trinity, which is controlled by Victor
Li, a son of Hong Kong billionaire Li Ka-shing, issued
a statement praising Mr. Milton's proposal as a
"positive gesture." As well, Trinity said that despite
having concerns that it would take much longer to
phase in the "necessary pension changes" if it makes
the switch voluntary, "the stakes are too high to
dismiss any proposal out of hand."

It called for a further meeting with Air Canada, the
carrier's unions and itself.

Trinity also has launched a website for Air Canada
employees -- http://www.trinitytime.ca -- where it
gives details of its plans for the airline and
explains why it favours defined-contribution pensions.

"We have had strong positive feedback from employees,"
Trinity adviser and director Harold (Sonny) Gordon
said in the statement. "They want a solution that will
keep Air Canada aloft, and preserve their jobs and
pensions."

Trinity has threatened not to proceed with a planned
$650-million investment to bring Air Canada out of
bankruptcy protection unless employees agree to the
pension plan switch.

But the unions are refusing even to discuss the
matter, arguing that their pensions were specifically
protected in new six-year collective agreements they
negotiated last year in which they gave up about
$1.1-billion in concessions.

They also are philosophically opposed to
defined-contribution pensions, because in such plans,
employers are no longer on the hook to bring pension
payments to retirees up to supposedly guaranteed
levels if the plan's investments fail to generate high
enough returns.

The Canadian Auto Workers union and the Air Canada
component of the Canadian Union of Public Employees
have already filed complaints with the Canada
Industrial Relations Board accusing Mr. Milton of
breaking the Canada Labour Code by approaching
employees directly on the pensions issue when they
have exclusive bargaining rights. Dave Ritchie,
general vice-president for Canada of the International
Association of Machinists and Aerospace Workers, Air
Canada's largest union, said yesterday that it is
filing a similar complaint with the CIRB.

However, Air Canada spokeswoman Laura Cooke defended
the move to seek staff's opinions on the pensions
issue, calling it "entirely appropriate" and
"perfectly reasonable" in the context of the airline's
restructuring "and the critical importance placed on
pensions."
 

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