has agreed to two deals that will keep some of the airline’s work at the engine and component business units that Aveos fleet performance is selling as part of its liquidation, likely boosting the businesses’ appeal to potential bidders.
One of the agreements creates an “exclusive” engine maintenance contract valid until 2018 that will be offered for sale along with the Aveos engine facility, according to a filing prepared by the court-appointed monitor overseeing the maintenance, repair and overhaul company’s bankruptcy proceedings. “Air Canada has agreed to provide its support and consent to the assignment of the new engines contract, so long as the successful purchases meet Air Canada’s requirements,” the monitor says.
The second agreement calls for Air Canada to issue a request for proposals (RFPs) for some 1,000 components current serviced at the Aveos component facility. “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 court filing says. The deal calls for a contract (or contracts) to be issued by July 11, or two days before initial bids are due on the component business.
The intent of these deals is clear. “The . . . agreement results 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’ largest customer,” says the monitor.
Aveos, the former Air Canada maintenance division spun off in 2004 to become Air Canada Technical Services, ceased operations in March and filed for protection under Canada’s Companies Creditors Arrangement Act. After determining that restructuring was not an option, the company set up a plan to divest its main businesses, which include separate airframe, engine and component businesses, a wheel shop, a training arm and other assets.
A June 6 deadline to receive bids on Aveos assets except the component maintenance center passed with no offers made on the airframe business, which includes facilities in Montreal, Vancouver and Winnipeg. No other information on the other assets was revealed.