March 21, 2012 / 6:53 PM / 6 years ago

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.

Boeing's 787 Dreamliner aircraft is seen during a media preview at an Air Canada hangar at Pearson Toronto International Airport in Toronto, March 2, 2012. REUTERS/Mark Blinch

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 all of its 2,600 Canadian employees, most of them 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.”

Federal Transport Minister Denis Lebel said late on Wednesday that the government was receiving advice on Air Canada’s obligations under the law that has governed its operations since its 1988 privatization.

“Aveos’s decisions are those of a private company. The law is the law. The Air Canada Public Participation Act requires Air Canada to maintain operational and overhaul centres in Montreal, Mississauga and Winnipeg,” Lebel said in a brief conference call with reporters.

Asked whether Aveos’s closure meant the airline was in violation of the law, Lebel said he was not saying that: “We are examining the advice we receive, but for now, nobody is saying that.”

Responding in a statement, Air Canada said it was in full compliance with the law.

The company said that it continues to maintain 2,300 maintenance employees across Canada, including in the required cities. It said a 2011 court ruling had found it met the location requirements on the basis of its remaining in-house maintenance operations alone, and that it was satisfied Aveos’s closure had not changed that finding.

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-Rivières, 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 in 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.

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, ultimately passing legislation to prevent a work stoppage.

Additional reporting by Susan Taylor, Randall Palmer, Euan Rocha and Louise Egan; Editing by Peter Galloway, Janet Guttsman and Carol Bishopric

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