Air Canada Placed On S&PWatch Following Pilot Strike.NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 9/2/98-- Standard & Poor's today placed its double-'B' corporate credit and senior unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. ratings of Air Canada on CreditWatch with negative implications. The CreditWatch placement follows a strike by Air Canada's pilots that has grounded the main carrier operations. Air Canada and the pilot union could not reach an agreement over wage increases, and the pilots began a legal strike action as of midnight Sept. 1. No renewed talks have been scheduled, and the airline has cancelled all flights scheduled for Sept. 2 and 3. Air Canada is expected to lose approximately $13 million of revenue per day. Daily cash losses will depend on how quickly other operations are closed and staff laid off -- once other operations are suspended sus·pend v. sus·pend·ed, sus·pend·ing, sus·pends v.tr. 1. To bar for a period from a privilege, office, or position, usually as a punishment: suspend a student from school. , cash losses are estimated to run about $7 million per day. At present, the daily cash cost is materially higher, with ticket refunds and payments to other airlines for carrying Air Canada ticketed passengersadding to operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. . As of June 30, 1998 Air Canada had $478 million in advance ticket sales; however this was at the start of the busy summer season, and before the strike date was set. Current advance ticket sales is estimated to be closer to $400 million. The company has over $1 billion in cash and committed bank lines, and could withstand an extended strike. Air Canada's 2,100 pilots are seeking substantial pay increases, with an original demand of a 20% increase over two years. According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. some public reports, the company has countered with a four year offer with 3%-5% annual increases. While the union claims they are underpaid un·der·paid v. Past tense and past participle of underpay. underpaid Adjective not paid as much as the job deserves underpaid adj → compared to their U.S. counterparts, Canadian air carriers operate in a different competitive environment and cannot afford to pay comparable wages. Air Canada's pilots are the highest paid in Canada. The company's yield -- an industry measure of unit revenues -- is lower than that of U.S. airlines, and Canadian domestic ticket prices are estimated to be approximately 30% lower than in the U.S. In addition, Air Canada's costs are already higher than the U.S. industry average; certain taxes and user fees are higher, and many of the company's costs are U.S. dollar currency based. During 1997 Air Canada's operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: (after depreciation and before interest and tax expenses) was 6.6%, lower than the U.S. industry average. Fiscal 1997 was the only year over the last 10 years that Air Canada posted Canada Post Corporation (French: Société canadienne des postes) is a Canadian postal service operated as a crown corporation. The successor to the Post Office Department of the Government of Canada, Canada Post was created on October 16, 1981 by the material net income from ongoing operations; investment gains contributed to profitability in other years. The union position would add approximately $15-$20 million in annual costs (on a pilot payroll of about $200 million), while the company position would add an estimated $7-$10 million. However, pilot costs are less than 20% of the company's total labor expense. Contracts with the flight attendant ATTENDANT. One who owes a duty or service to another, or in some sort depends upon him. Termes de la Ley, h.t. As to attendant terms, see Powell on Morts. Index, tit. Attendant term; Park on Dower, c. 1 7. and machinist unions expire expire /ex·pire/ (ek-spi´er) 1. to exhale. 2. to die. ex·pire v. 1. To breathe one's last breath; die. 2. To exhale. this fall, and a settlement with the pilot union will set a precedent for these other negotiations. Ratings could be lowered if the strike and its settlement are sufficiently costly and materially impact Air Canada's financial position, Standard & Poor's said.---CreditWire
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