Quebec court delays sale of Aveos engine repair business to Lufthansa Technik
Delay granted to give union and an unsuccessful bidder opportunity to challenge fairness of proposed sale
Risk & Compliance
International Association of Machinists and Aerospace Workers
mergers and acquisitions
MONTREAL—A Quebec court gave former Aveos employees a glimmer of hope after delaying the sale of its engine repair business to a German company by one week.
The delay was granted to give the union and an unsuccessful bidder an opportunity to challenge the fairness of the proposed sale to Lufthansa Technik.
“From what transpired today, I think it is the best possible outcome and it will give us a chance to make things right here,” International Association of Machinists and Aerospace Workers (IAMAW) district chairman Chuck Atkinson said outside the courtroom.
Atkinson said the IAMAW and Vancouver-based MTU face an uphill battle.
Both challenged the transparency and fairness of the sales process and the veracity of the report submitted to the court by the chief restructuring officer.
“We have a whole lot of misinformation from the CRO’s part and there’s a lot of things that need to be clarified so we can proceed on a reasonable basis,” added Atkinson.
Lawyers representing the machinists union and MTU Aero Engines will split a half a day next Wednesday to grill Jonathan Solursh and present their case about why Lufthansa shouldn’t be awarded the sale.
The court-appointed monitor and lawyers representing the other side will have the remaining time to reinforce their recommendation to Justice Louis Gouin, Justice Jean-Yves Lalonde decided.
At stake are potentially more than 130 jobs in Montreal and Vancouver, mostly those of former Aveos workers.
Union lawyer Hugh O’Reilly told the court that 150 to 200 jobs could be created if MTU’s offer is approved.
The Quebec government has written a letter supporting MTU’s bid.
Aveos terminated about 2,600 jobs across the country, including some 1,800 in Montreal, when it suddenly obtained creditor protection and closed its operations in March.
The judge granted the request for a delay after Air Canada agreed to extend the deadline for its contract with the winning bidder beyond its Aug. 15 deadline to meet its engine maintenance needs for the fall season.
The airline’s agreement includes an exclusive contract for the engines business through 2018, which the court was told is worth about $100-million.
Lufthansa also agreed to the delay.
The union said the German company wouldn’t preserve jobs in Canada while a competing bid from MTU would save 100 jobs in Montreal and 30 in Vancouver.
But Solursh’s report said both bids “appeared to be equal” in terms of jobs creation in Quebec, although the MTU offer would create up to 130 jobs in Vancouver.
In any case, he said those extra jobs won’t likely go to former Aveos employees since the B.C. centre focused on airframe overhaul.
Lufthansa doesn’t have an engine repair facility in Canada but plans to set up a small shop in Montreal to fulfill part of the service requirements of Air Canada.
Most of the work will be carried out at its facilities overseas.
Lawyers for the monitor and secure creditor Credit Suisse insisted that the bid submitted by Lufthansa Technik AG was far superior to the other bid from a financial perspective and appeared to be equal with respect to job creation in Quebec.
They said MTU’s offered price was about half the price offered by Lufthansa.
The price was not disclosed but MTU confirmed in court that its offer was $5.2-million, including Aveos tools it wanted to purchase.
The firm agreed in court to waive the purchase of the tools as a condition of its offer.
The court ruling came after about 60 frustrated Aveos workers protested outside the courthouse, demanding that at least some of their jobs be preserved as the insolvent aircraft maintenance firm is dismantled.
“We will never lose hope,” said union representative Jean Poirier, who is running for the Parti Quebecois in next month’s provincial election.
Earlier, the court approved the sale of the component repair business of Aveos Fleet Performance to British-based firm A J Walter Aviation.
AJW said it will establish the Montreal facility as its new global headquarters for the maintenance, repair and overhaul of aircraft components and create about 200 jobs in the coming months.
Lalonde also rejected Air Canada’s attempt to prevent Wednesday’s planned auction in Vancouver of cranes in the Aveos hangar that will be returned next month to the airline.
MTU’s lawyer accused Solursh and monitor FTI Consulting of misrepresentation in its reports to “bulldoze” the company.
“My client feels that it had the best and highest bid,” Francois Gagnon said.
“We need to flush this situation out fully because my clients’ rights and the integrity of the process are at stake.”
But Aveos lawyer Roger Simard accused MTU of being a disgruntled losing bidder that shouldn’t be given standing by the court.
He also opposed the delay.
“I don’t see you will be in a better position next week than you are today,” he told Lalonde.