Authors: Julien Bilodeau, Caroline Talbot and Sylvie Berthelot
On April 1, 2003, Air Canada and some of its subsidiaries (the applicants) obtained a court order providing protection against its creditors. In this context, Canadian legislation specifically aims at preserving jobs and a firm’s value by preventing immediate foreclosure. Accordingly, a "plan" was proposed to save Air Canada: the plan was “developed to enable the applicants ... to emerge from the … proceedings as viable long-term competitors …” 1 On September 30, 2004, ACE Aviation Holdings Inc. became the "replacing" company and later the controlling interest in the "new" Air Canada. The case investigates what happened to the assets that ACE Aviation Holdings Inc. took over. More specifically, we look at the financial consequences of this takeover on the main stakeholders of Air Canada as well as other stakeholders. The composition of Air Canada’s Board of directors is also analysed and its effectiveness in protecting stakeholder’s wealth is discussed. The conclusion reveals that ACE Aviation Holdings Inc., the controlling entity, is a clear winner in the process of “saving” Air Canada as compared to the other stakeholders. Our results also support the idea that when there is a controlling interest a new type of agency problem arises.
Keywords: edge-funds, financial distress, agency conflict, stakeholders