Air Canada: From One Crisis to Another

Air Canada offered to buy CAI's international business in August 1999. In the same month, Onex Corp. (Onex), along with its strategic partner American Airlines, offered to buy both Air Canada and CAI for US$1.8 billion and then merge the two airlines. Air Canada also accused Onex of attempting a hostile takeover. Following this, Air Canada increased the number of its outstanding shares through a shareholders rights plan, effectively doubling the price of any takeover offer. Air Canada also scheduled a special shareholders meeting to discuss Onex's offer on January 7, 2000. Onex considered Air Canada's actions 'disrespectful and arrogant' and took legal action against it, demanding that the meeting be rescheduled to an earlier date...

The merger resulted in the addition of 16,000 employees of CAI to Air Canada's employee base. Of its 40,000 employee base, around 10,000 were surplus (on account of duplicate positions). However, the company could not lay off the excess workforce due to the terms of the merger agreement.

All along, trade unions of both the companies had expressed their displeasure over the deal, fearing lay-offs and wage cuts. Analysts too felt that as the two airlines had been bitter competitors for many decades, it would prove to be very difficult for the respective workforces to establish harmonious working relationships...