American to invest dollars 195m in Canadian Airlines
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Your support makes all the difference.AMR, the parent company of American Airlines, has agreed to make a Cdollars 246m ( pounds 129m) equity investment in Canadian Airlines International as part of a wider alliance under which the US carrier will provide administrative services such as accounting and data processing for Canadian.
The deal, which will not affect the domestic or international flying operations of either airline, will enable American to sell its more efficient and lower-cost services to Canadian, generating revenues worth about USdollars 115m ( pounds dollars 76.6m) in the first full year.
'By far the most important aspect of the deal to AMR is the services agreement,' said Donald Carty, executive vice-president at AMR, noting that American wished to diversify by expanding its non-airline activities.
The 20-year services contract, which includes complex computerised activities such as operations planning and pricing, yield management and US-originating reservations, fits in with this strategy by providing American with a steady stream of fee-based revenue.
The two carriers will also link their frequent flyer programmes under the terms of the deal, which is expected to close no later than the autumn of 1993 and is part of a wider restructuring for the troubled Canadian carrier. It will require the approval of the Canadian and US governments.
American will receive convertible preferred stock in return for its dollars 195m investment, giving it a 33 per cent economic interest in Canadian and a 25 per cent voting interest. American will control none of Canadian's main strategic business interests, and Canadian will have a continuing option to buy out American's interest at any time.
Rhys Eyton, chairman and chief executive of Canadian's parent, PWA, said the agreement would allow Canadian to strengthen its financial position and lower costs.
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