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Isle judge gives
Canadian Air
asset protection

Most of the airline's U.S.
holdings are in Hawaii

By Peter Wagner
Star-Bulletin

U.S. Bankruptcy Judge Lloyd King has granted a request by Canadian Airlines Inc. for protection of its assets within the United States, an "ancillary" action to the airline's reorganization efforts in Canada.

Canadian Airlines, the second-largest carrier in Canada, on March 24 filed for protection from its creditors under Canada's Companies' Creditors Arrangement Act, similar to a Chapter 11 bankruptcy in the United States. It filed for ancillary protection in Honolulu on the same day, saying most of the company's holdings outside Canada are in Hawaii.

According to court documents, Canadian Airlines has 127 employees in Honolulu and cargo facilities, administrative offices, ticket and service counters, baggage-handling facilities, a customer lounge, maintenance facilities, ground equipment and aircraft parts inventory. The airline's cargo revenues in Honolulu last year amounted to 10 percent of Canadian Airline's total.

Attorneys for the airline yesterday told Judge King the company could be irreparably harmed if creditors in the United States ignore Canadian authority and try to reclaim their property.

"There are concerns regarding the enforceability of the Canadian Court's order outside of Canada," court documents say. "There is a substantial risk that one or more creditors may attempt to avoid the prohibitions in the (Canadian court's) order by attempting to seize the company's aircraft or other assets in the United States."

Such action could result in stranded passengers and potentially ruinous publicity for the airline, the documents say.

Canadian Airlines was acquired by Air Canada, Canada's largest airline, in January however Air Canada did not assume the smaller company's debts.