Canadian Airlines Board Resigns As Carrier Fights to Stay Solvent

Canadian Airlines International Ltd., Canada's second-largest airline, says it will close by the end of this year if its workers won't accept a 10 percent wage cut. Backing this tough talk is a spectacular act: Canadian's 10-member board of directors resigned en masse Friday to avoid exposure, it said, to huge personal liabilities. Under Canadian law, directors can be held responsible for unpaid debts of a bankrupt company. Unions leaders called the move an "intimidation tactic."

If Canadian Airlines fails, many of its routes would go to larger Air Canada and industry competition might decline.

"Low fares would go by the board," says Max Ward, founder of Wardair, which was Canada's No. 3 airline until Canadian bought it in 1989.

It was a purchase Canadian Airlines never really got over. The carrier has lost $1.4 billion (Canadian; US$1.05 billion) since 1990. Its board included prominent Canadian business and political leaders and Robert Crandall, chairman of AMR, the holding company of American Airlines and a 25 percent stakeholder in Canadian.

The Canadian Auto Workers, the union that represents Canadian's flight attendants, says it won't budge on wages. But members are calling for a free vote on the issue. Only the pilots union has agreed to a pay cut.

Canadian also wants to abandon money-losing domestic routes, such as flights to Moose Jaw, Saskatchewan, and focus on overseas routes. The company runs four daily Toronto-London flights and has doubled Vancouver-Beijing service in the past year to 10 flights per week. It also flies to Tokyo, Hong Kong, and Rome, and has expanded US routes.

AMR has shown no interest in bailing out its Canadian partner. Under Canada's foreign-ownership laws, any further investment by AMR would require federal-cabinet approval.