Air Canada Files For Bankruptcy
Air Canada, which ended 2002 with a $295 million loss and some $8.8 billion in debt, filed for bankruptcy last Tuesday as it threw in the towel on a losing battle against a generally poor economy, the war in Iraq and a mysterious illness called severe acute respiratory syndrome (SARS). The airline, Canada's only major national and international carrier, will be asking the Canadian government and its unions for help in climbing out of its financial morass. The government is considering loan guarantees, and unions accepted 3,600 layoffs and deferred pay increases. The Canadian government has rejected a cash bailout similar to one offered to U.S. airlines. On Thursday, Congress approved $3.2 billion in immediate aid to the airlines as part of an overall spending package for the war in Iraq. The White House opposed the bailout, arguing the airlines need to cut more costs and solve their systemic financial problems without asking for handouts. That argument had some support on Capitol Hill. "We are creating, unless we change this process, an Amtrak in the air," said Rep. Jeff Flake (R-Ariz.), referring to the government-dependent passenger railway. But House Speaker Denis Hastert said the package was passed to avert a meltdown of the industry. "It's just getting them through this tough time, that we don't have the whole industry collapse at a time when maybe we need it most," he said. Airline CEOs, meanwhile, are doing their part to save their companies money. Delta boss Leo Mullin says he'll cut his own salary by 15 percent (to $595,000) and pass on $5.5 million in bonuses in the coming year. United CEO Glenn Tilton is also taking a 25-percent salary cut to $712,500. No word on his bonus package.