Air Canada: Aveos rejects financing and permanently ceases operations

By Caroline Salls

Pittsburgh, March 20 - Aveos Fleet Performance Inc. has rejected Air Canada's offer of $15 million in emergency financing and has instead decided to permanently cease operations, according to an Air Canada news release.

If accepted, Air Canada said the $15 million debtor-in-possession financing could have helped stabilize Aveos for the benefit of its employees and stakeholders and supported an orderly restructuring.

According to the release, this stabilization would have permitted Aveos to reopen some of its facilities and recall some of its employees, which would have allowed Air Canada to provide additional maintenance work to Aveos.

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.

In addition, Air Canada said management at Aveos has failed repeatedly to attract new business to expand and diversify its revenue stream.

Aveos claims that Air Canada has withheld or directed elsewhere maintenance work it should have properly received, Air Canada said in the release.

However, Air Canada said it has undertaken 135 airframe checks since the beginning of 2011, and Aveos performed 123, or 91% of them.

Air Canada said Aveos has also performed 52 of 56, or 93%, of engine checks performed for the airline.

Air Canada said 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 has been very supportive of Aveos and has provided financial and other assistance to the company," the release said.

Air Canada contributions

Specifically, Air Canada said it participated in a 2010 out-of-court restructuring through a $22 million term note that allowed Aveos to defer payments without interest penalty when its cash reserve fell below a prescribed level.

Air Canada said it also committed up to $50 million to reimburse Aveos for airframe operating losses as part of the 2010 restructuring, paid or advanced about $9 million on March 15 in connection with various invoices and offered Aveos financing to support its restructuring and allow it to remain in business on several occasions.

Air Canada said Aveos owes it net amounts in excess of $35 million.

Air Canada said it will be activating its contingency plan to ensure its customers are able to continue traveling and booking Air Canada.

The company said the contingency plan will ensure that maintenance work continues in full compliance with all regulatory requirements.

As previously reported, Aveos has initiated proceedings under the Companies' Creditors Arrangement Act in the Superior Court of Quebec after it ceased its Airframe maintenance service operations on March 18.

Aveos Fleet Performance Inc. is a Montreal-based full-service maintenance, repair and overhaul provider to the aviation industry.

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