As Air Canada heads for arbitration hoping to further cut costs, the company formed following the airline's court-supervised restructuring is preparing to shell out millions more to investors before finally winding down.
ACE Aviation Holdings , once Air Canada's largest shareholder, plans to distribute up to $300 million to shareholders following an April vote to approve the company's liquidation.
The Montreal-based company formed in 2004 said Tuesday that it plans an initial distribution of $250 million to $300 million in the weeks following the April 25 shareholder vote, according to a proxy circular sent to investors.
A final distribution is expected after mid-2013.
Between 2004 and 2011, ACE returned $4.5 billion to shareholders from the sale of its equity interests in Air Canada's former operations.
ACE has sold most of its assets — including the companies now known as Chorus Aviation , which operates the Jazz air service;, loyalty program Aeroplan or and Aveos, which overhauls aircraft — and distributed the bulk of the money to shareholders.
"The liquidation of ACE is the logical and consistent concluding step in the execution of this strategy through the distribution of the remaining net assets of ACE to its shareholders," ACE Aviation chief executive Robert Milton said in a letter accompanying the proxy circular.
Labour leaders who are fighting for new collective agreements and stem the launch of a new low-cost carrier said Air Canada's financial woes have resulted from the stripping of the carrier's value by ACE Aviation.
"This was just an opportunistic asset play by vulture capital," said Capt. Paul Strachan, president of the Air Canada Pilots Association.
The pilots' union and machinists are the last two groups with which Air Canada needs to reach an agreement.
Strachan said ACE's efforts paid the airline a pittance of its market value while forcing it into agreements that bleed revenue to the former subsidiaries and made workers agree to massive concessions.
"It has been a very, very frustrating and demoralizing experience for Air Canada employees at large and pilots in particular," he said in an interview.
Particularly galling is that Air Canada CEO Calin Rovinescu stands to receive a $5-million retention bonus next month after just three years at the helm, Strachan added.
Milton also collected some $80 million over his tenure at both companies even though Air Canada has not been consistently profitable.
Milton has said the formation of ACE would allow the intrinsic value of Air Canada to surface beyond what was recognized by investors.
The union representing mechanics, baggage handlers and other ground crew at Air Canada said the federal government's decision to impose arbitration on its talks with the airline is eroding labour rights.
"This will undermine free collective bargaining and poison labour relations across Canada," said Dave Ritchie, Canadian general vice-president of the International Association of Machinists and Aerospace Workers.
Citing a need to protect the economy, Labour Minister Lisa Raitt proposed back-to-work legislation on Monday that would send the airline's disputes with the two labour groups to binding arbitration.
Under the "final offer selection" arbitration process, the unions and airline will both put forward their best offer and an arbitrator will pick one.
"Final offer selection does not allow the arbitrator to take into consideration any one item for which it would make sense to change on either side's behalf," Ritchie said.
Strachan added that the government's legislation is "blatantly slanted in favour the corporation's position."
But the minister said the federal government is not taking sides in the dispute by initiating final offer arbitration.
"Who's to say that the arbitrator is not going to pick the union's point of view?" Raitt asked rhetorically at a news conference.
"They have fair ball at the table."
Flights at Air Canada were set to stop this week after the airline said it would lock out its pilots and the machinists union said it would strike in the midst of the key spring holiday season.
However Raitt stepped in and blocked a work stoppage by referring the matter to the Canada Industrial Relations Board.
ACE's main assets are $351 million or cash and equivalents, 31 million Class B voting shares in Air Canada and warrants to purchase Air Canada shares.
Shareholders will also vote on proposals to convert ACE class A shares, which are reserved for non-Canadian residents, and class B shares into one voting class.
Since ACE no longer holds a significant interest in any holder of a licence under the Canada Transportation Act, the company said the dual class structure is no longer necessary to meet Canadian rules for foreign ownership of airlines.
Support from two-thirds of shareholders is also required for a voluntary liquidation of the holding company.
Meanwhile, ACE said Milton earned $441,232 in consulting fees and airline travel allowance in 2011, compared with $525,000 in 2010.
The former chief executive of Air Canada received $14.7 million in 2009. The amount included $13.9 million in the form of $5 million incentive award as part of his employment contract and stock options in lieu of severance and retirement benefits.