Aveos parent eyes El Salvador after Canada closing

Fri Mar 23, 2012 4:07pm EDT

* El Salvador operations unhurt by Aveos shutdown in Canada

* Aveos's parent invests millions in Salvadoran expansion

* Salvadoran operation hires more workers

By Nelson Renteria and Euan Rocha

SAN SALVADOR/TORONTO, March 23 (Reuters) - The parent of an aircraft maintenance company spun off by Air Canada is expanding in El Salvador even as its Canadian arm liquidates its assets after terminating more than 2,600 employees.

Aveos, which shut its doors in Canada earlier this week, has corporate ties with El Salvador's Aeroman, with Aero Technical Support & Services Holdings, a closely held company domiciled in Luxembourg, owning both of them.

While Aveos may count the Salvadoran unit as part of its network, the two operations are independent of each other, said Ernesto Ruiz, chief executive of Aeroman.

"Our board of directors made the decision to continue the expansion in El Salvador," Ruiz said in an interview with Reuters. "At this time we are about to complete construction on hangar No. 4, which will have capacity for three airplanes and which should be operational by early April."

In a letter to its roughly 1,800 workers in the tiny Central American country, Aeroman said Aveos' financial plight in Canada would have no effect on their jobs in El Salvador.

Aveos filed for creditor protection in Canada on Monday, but neither Aveos nor its lawyers in Canada have so far said what impact, if any, this would have on the El Salvador operations.

Both Air Canada and Aveos, once the airline's own in-house maintenance unit, have faced harsh criticism after mass layoffs in Montreal, Vancouver, Winnipeg and other Canadian cities.

Aveos blames Air Canada for its financial failure, claiming that the country's largest carrier breached its contracts by deferring or reducing maintenance work it normally performs. Air Canada has denied that, saying it has met all of its contractual and financial obligations to Aveos.

The terminations are the latest blow to the Canadian organized labor movement, which is the throes of a sharp decline in membership. In some cases, unionized workers have accepted deep contract concessions, with their employers facing new competitive pressures. Costs have risen partly because of the strength of the Canadian dollar against the greenback and other currencies.

Caterpillar earlier this year closed a locomotive plant in London, Ontario, and terminated 450 workers. Blaming high costs in Canada, the heavy-equipment maker moved much of its work to sites in the United States.

Aeroman's Ruiz said there is no talk of moving Air Canada maintenance work to El Salvador even though Aveos's parent is pouring millions into expanding operations there. He said Aeroman aims to attract more work from the United States, Latin America and the Caribbean.

Air Canada said it has identified "qualified and government approved" facilities in Canada and the United States to replace Aveos, which has performed much of its heavy maintenance work.

Representatives of Aveos and its parent could not be reached to comment about the expansion in El Salvador.

NEW HIRES

Aeroman, acquired by Aveos's parent in 2007, will have nearly tripled its operational capacity by the time the current expansion is complete next month, going from four aircraft maintenance lines to 11.

While Aeroman has grown, Aveos has scrambled to restructure, reduce costs and increase revenues. In a statement issued six months ago, the chief executive of Aveos said the Salvadoran expansion has been driven by increased customer demand for "high quality, on-time, cost-efficient product."

Aeroman and its parent have invested $16 million in the new hangar alone, said Ruiz, adding that about $60 million in all has been poured into infrastructure at the site.

"Obviously we are going to hire more personnel," said Ruiz, noting that the three new maintenance lines at the new hangar would require more trained aircraft maintenance crews.

Aeroman services and overhauls the air frames of narrow-body aircraft such as the Airbus A318, A319, A320 and Boeing's 737 and 757 series. Its clients include JetBlue, US Airways and Southwest.

"We have some 1,800 employees either working on the aircraft or in support functions," Ruiz said. "We have more than 200 technicians in training for these new lines of production, which will bring Aeroman to more than 2,000 employees once they are in operation."

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