Squeezed by Air Canada, aircraft repair firm Aveos shuts down

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Aircraft repair firm Aveos Fleet Performance Inc. has filed for bankruptcy protection, laid off more than 2,600 workers and shut plants in Montreal, Winnipeg and Vancouver as it faces a cost squeeze from Air Canada.

Aveos, formerly called Air Canada Technical Services, has struggled since being spun off from the airline in 2004. Nearly 1,800 of the Canadian workers who lost their jobs were those assigned to airframe heavy maintenance projects, which involve labour-intensive checks.

Joseph Kolshak, chief executive officer at Montreal-based Aveos, blamed Air Canada for triggering the shutdown because the airline deferred and cancelled maintenance work over the past two months. "This has been a devastating blow to Aveos," he said in a statement Monday.

A sluggish global economy and high labour costs also hurt Aveos, Mr. Kolshak said.

The widespread layoffs underscore the challenges faced by unionized service companies in Canada as they strive to compete against lower-cost rivals.

In 2010, Canadian employees at Aveos earned between $1,700 and $5,500 a month, depending on their skills and experience, compared with $350 to $1,200 a month at a plant in El Salvador named Aeroman, which is 80-per-cent owned by Aveos. Aeroman does not service Air Canada planes, though the airline is now looking at lower-cost repair service options.

Air Canada said it's disappointed by the financial troubles at Aveos, but emphasized that it has contingency plans to hire Canadian and U.S. companies to perform the heavy maintenance checks and inspections, ranging from hull repairs and window replacements to corrosion treatment and wing modifications.

The Winnipeg plant is scheduled to shut down and lose 412 jobs, the Vancouver operation would close and shed 356 jobs while the Montreal site is likely to have at least 1,000 positions axed.

If the aircraft repair firm is able to restructure, about 800 jobs might be preserved in Montreal for engine overhaul and component repairs, but union officials are fearing a shutdown of the Quebec plant, too.

The country's largest airline offered to extend $15-million in emergency financing to Aveos late Monday through court-appointed monitor FTI Consulting Canada. Air Canada is hoping the "debtor-in-possession" financing will help stabilize Aveos and allow it to conduct an orderly restructuring and pave the way for recalling some of the employees in Montreal for engine overhaul and component repairs.

Aveos derives most of its revenue from Air Canada.

Some workers in Montreal said a dozen SUVs and trucks drove onto their plant site on Sunday before they learned from an Aveos manager that they had been locked out.

Aveos terminated all employees on airframe heavy maintenance projects on Sunday and "notified all other of its employees to not report for work as of Monday," Aveos said in its 41-page petition for protection under the Companies' Creditors Arrangement Act.

In the fourth quarter of 2011, Aveos lost $48.9-million and its liabilities recently exceeded the book value of assets by $219.8-million, according to the filing in Quebec Superior Court. The company had a pension solvency deficit of $26-million at the end of 2011.

"We no longer have the capital resources we need to continue to do business," Mr. Kolshak in a memo to employees. An American, he returned to the United States after authorizing the filing for bankruptcy protection in Montreal.

The filing alleged that Air Canada has been soliciting "undercutting bids" from rival aircraft repair companies.

Hundreds of workers protested the planned shutdown by demonstrating at Montreal's Trudeau Airport on Monday, including at a hangar and building used by Aveos, as well as in front of Air Canada's head office.

The International Association of Machinists and Aerospace Workers, representing 2,300 of the workers at Aveos, called on Ottawa to intervene because the union argues that the Air Canada Public Participation Act protects some of the jobs, notably those in Montreal and Winnipeg.

Dave Ritchie, the IAMAW's Canadian general vice-president, said it's important for the federal government to recognize the value of highly skilled jobs in Canada.

The IAMAW represents workers at Aveos facilities across the country. Besides the plants, there are also a total of 67 Aveos employees in Edmonton, Calgary, Trenton, Ont., Toronto and Ottawa.

"These events at Aveos, while disappointing, have no impact on Air Canada's day-to-day aircraft maintenance and repair activities, referred to as 'line maintenance.' 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," Air Canada said.

In 2010, a group of lenders took majority control of Aveos.