MONTREAL — The filing for bankruptcy protection by Aveos Fleet Performance Inc. in Quebec Superior Court's commercial division Monday details catastrophic corporate finances and abysmal relations with its main client, Air Canada.
The request for protection under the Companies' Creditors Arrangement Act shows revenues for Aveos and its U.S. division, Aero Technical U.S. Inc., slumped by $16 million in "less than two calendar months" this year due to the airline having "reduced, cancelled and deferred maintenance work with Aveos" since the start of 2012.
The airline, Aveos alleges, has even refused to deliver planes for long-scheduled maintenance.
"The loss of such work has been devastating for Aveos's financial position," the request states. Aveos, a former division of Air Canada that was sold off in 2004 during restructuring, relies on Air Canada for about 85 per cent its business.
In addition, the maintenance company's finances have been hit by "crushingly high labour costs, rising fuel prices and reduced airline traffic."
That has made it unable to compete with low-cost aircraft MRO (maintenance, repair and overhaul) service providers in Latin America, according to the company. Aveos itself owns Aeroman, a fast-growing MRO facility in El Salvador.
The company expelled many of its 3,000 workers from three sites late Sunday and locked the factory gates in Montreal, Winnipeg and Mississauga, Ont. Hundreds of employees protested early Monday at the Montreal facility, next door to Air Canada's head office, against what its union called "a savage shutdown."
Air Canada said in a news release Monday the shutdown of Aveos and its application for insolvency protection was disappointing, but that it doesn't affect the general maintenance of Air Canada's fleet.
"The airline's line maintenance has always been performed directly by Air Canada, at the airline's own facilities by Air Canada's 2,300 maintenance employees. The airline typically performs its line maintenance activities overnight or between flights, as necessary," the release says.
According to Air Canada, Aveos primarily provides maintenance on airframes and engines and the work is generally scheduled in advance.
"The airline is prepared with a contingency plan to ensure continuity of this work and that it will continue to be performed in compliance with all regulatory and legal requirements," the company said.
Air Canada said it has several agreements with "a number" of other companies scattered mostly throughout the United States and Canada who could provide maintenance if necessary.
Aveos stated that as of March 9 it had accumulated $60 million in accounts payable, "most of which are more than 30 days past due."
As of last September, Aveos' liabilities exceeded the book value of its assets by more than $165 million. By January, that disparity had shot up to $219.8 million. As a result, Aveos posted a fourth quarter loss last year of $48.9 million.
— With files from Robert Hiltz, Postmedia News.
Source: http://www.montrealgazette.com
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