July 02, 2012
The June 7 initial bid deadline for bankrupt Canadian MRO provider Aveos's assets passed with mixed news, including indications that Air Canada is willing to help land work for the buyers of the engine and component businesses, while no bids were received for Aveos's airframe assets.
An agreement between Air Canada and Aveos will create a “new, exclusive” engine maintenance contract that will be offered for sale along with the Aveos engine facility, “so long as the successful purchaser meets Air Canada's requirements,” according to a filing prepared by the court-appointed monitor overseeing the proceedings. “Air Canada has agreed to provide its support and consent to the assignment of the new engines contract,” the monitor explained. The contract would run through 2018, according to the court filing.
Air Canada also would issue a request for proposals for some 1,000 components serviced by Aveos. “The components RFP will be used to secure a contract for a term of not less than five years and not more than 10 years, and will stipulate that the work on these components must be undertaken in the current Aveos components facility,” the filing states. The agreement calls for Air Canada to present a contract (or contracts) to Aveos by July 11.
According to the filing, this would result “in a higher probability that both the engines and components business will be sold to a party that can restart operations, as it will have the support of Air Canada, Aveos's largest customer.”
Air Canada's characterization of the agreement was less definitive than the monitor's report. “As disclosed in the monitor's report, we have provided arrangements that will assist Aveos's chief restructuring officer in finding potential purchasers for the engine and component business,” Air Canada states. Those details are confidential.
The monitor's report also indicates that no bids were received for the airframe business, which includes facilities in Montreal, Vancouver and Winnipeg and employed about 1,500 of the 2,600 employees laid off.
Aveos, the former Air Canada maintenance division spun off in 2007 to become Air Canada Technical Services, ceased operations in March and filed for protection under Canada's Companies' Creditors Arrangement Act (CCAA). After determining that restructuring was not an option, the company set up a plan to divest its businesses, which include airframe, engine and component operations as well as a wheel shop, training arm and other assets.