Air Canada’s restructuring plan got a boost yesterday from tentative deals with the last of its five major unions and news that the cash-strapped airline may be able to tap funds from federal agencies.
Air Canada announced that it has reached agreements with the Air Canada Pilots Association and the Canadian Union of Public Employees, which represents flight attendants. Three other unions had reached similar deals last week.
The tentative contracts include a pension funding holiday and equity restructuring.
The agreements are subject to a number of conditions, including Air Canada raising $600 million of new financing, ratification by union members and federal regulatory approval for the proposed changes to the pension contributions.
The Air Canada Pilots Association represents approximately 3,200 pilots and CUPE represents approximately 6,700 flight attendants. However, negotiations are continuing on the extension of the flight attendants’ contract.
Airline analyst Jacques Kavafian said the deals make it less likely that the company will file for bankruptcy protection, especially since the federal government is rumoured to back a $600-million loan. Reports say that government agencies will provide $200 million.
Following the 21-month moratorium on past service payments, the deals require the airline to pay $150 million in 2011, $175 million in 2012, and $225 million in 2013.
That’s considerably less than the maximum $645-million pension funding obligation that would have been required in 2009, said David Newman of National Bank Financial.
Unions would receive a 15 per cent equity stake in the airline, to be issued to a trust. Proceeds from the sale of the shares would be used to reduce the pension deficit, which at last count stood at $2.9 billion.