Quebec could sue Air Canada, Ottawa over Aveos

(Reuters) - Quebec's government said on Wednesday it was considering taking legal action against both Air Canada and the federal government to keep operations going at the Montreal facility that services the airline's planes.

The facility, once part of Air Canada's own maintenance unit, was operated by Aveos Fleet Performance Inc., a private company that obtained bankruptcy protection on Monday. It ceased Canadian operations and laid off most of its 2,600 Canadian employees on Tuesday. That included 1,700 workers in Montreal.

"We will do all, all, all we can to keep the operations open, to see how we can help the workers and the company," Quebec Premier Jean Charest told the province's legislature.

"We will examine all the options available, including the possibility of taking legal action against the federal government."

The federal law that has governed Air Canada's operations since its 1988 privatization requires it to "maintain operational and overhaul centers" in Montreal as well as in Winnipeg, Manitoba, and Mississauga, Ontario.

In a statement, the opposition New Democratic Party said the Aveos shutdown breached that regulation.

Aveos has blamed much of its financial difficulty on Air Canada. It said the airline reduced the work it sent to Aveos, particularly in the last two months, precipitating a crisis.

Air Canada, Canada's biggest airline, countered on Tuesday, saying it had given Aveos financial and other assistance. It said it had identified "qualified and government approved" facilities in Canada and the United States to replace Aveos.

"The transition to new service providers is underway and will have no impact on customers," it said in a message to passengers posted on its website.

On Tuesday the airline said it would send three planes scheduled for maintenance this week to Premier Aviation, in Trois-Rivi?res, Quebec, as part of a contingency plan.

Air Canada's stock, which has been falling since early February, dropped 3.3 percent on Tuesday and an additional 3.4 percent on Wednesday, hitting its lowest point since 2009. The actively traded class B shares closed three Canadian cents lower at 85 Canadian cents.

PI Financial analyst Chris Murray said Premier, which does work for WestJet, was only one of a number of suppliers that could replace Aveos, and StandardAero, which has a facility in Winnipeg, could likely do some of the engine work.

Murray said concerns about the shutdown affecting Air Canada's business were overdone, and noted that traffic data was very strong. "Would you care if they changed catering companies?" he asked.

The government of the province of Manitoba, where more than 400 jobs were lost, said it had been touch with Quebec.

"We are eager to coordinate our response to the situation with Quebec," said spokeswoman Rachel Morgan. She said it was too early to say whether Manitoba would take legal action.

A spokeswoman for Denis Lebel, the federal transport minister, had no immediate comment on the possibility of legal action from Quebec or Manitoba.

On Monday spokeswoman Genevieve Sicard expressed sympathy with workers affected by Aveos's decision, while noting Aveos's "decisions are that of a private company."

Air Canada, which is trying to cut costs and change the way it operates, already has labor contract disputes with its pilots and machinists unions headed to binding arbitration. It faced a simultaneous strike and lockout earlier this month until the federal government intervened and ended up passing legislation to prevent a work stoppage.

(Additional reporting by Susan Taylor, Randall Palmer and Euan Rocha; Editing by Peter Galloway and Janet Guttsman)

Source: http://news.yahoo.com/quebec-could-sue-air-canada-ottawa-over-aveos-184345100.html

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