Air Canada and its main pilots union extended discussions past a court-imposed deadline of midnight Saturday in an effort to save Canada's national airline from bankruptcy.
Just minutes after the deadline passed, a spokesman for the airline's low-cost, regional subsidiary, Jazz, announced that it had reached a deal with its pilots.
PHOTO: CP
Air Canada has already reached agreements with eight of its nine unions in an effort to cut C$800 million (US$576 million) from its C$3 billion labor bill.
Ontario Superior Court Justice James Farley ordered a rare Sunday morning hearing at which he was to consider whether Air Canada should be pushed into bankruptcy. Negotiators for the main pilots association and the airline are expected to continue talks until just before the 8am hearing.
After years of poor management, and beleaguered by competition from inexpensively operated regional airlines and the plunge in air travel from fears of terrorism and now SARS, Air Canada is facing extinction.
Since filing for bankruptcy protection two months ago, Air Canada has lost nearly C$5 million a day while feverishly trying to secure cost concessions from its nine unions. While eight of those unions have agreed to pay cuts and layoffs in an attempt to save some of their members' jobs along with the airline, Air Canada's pilots have refused to go along.
But after the pilots rejected Air Canada's latest offer last week, Farley gave the two sides an "absolute" deadline of midnight Saturday to work out a deal or face a court-imposed settlement that could see the airline grounded and its planes seized.
Air Canada has played down the airlines potentially ominous fate, with its officials insisting the carrier is conducting "business as usual."
Trading in Air Canada shares was halted Friday after Farley issued his deadline.
"There is no time to leisurely reach a solution on this," Farley said, otherwise "We will have an academic debate over the bones once the buzzard has already picked them."
Lawyers for Air Canada and the 3,100 members of the Air Canada Pilots Association told Farley on Friday they had not been able to reach agreement after exhausting the previous three-day deadline Farley set for them.
A report issued May 29 by Ernst & Young, the court-appointed monitor of the case, said all eight of Air Canada's other union and nonunion employees have agreed to a total of C$766 million in annual savings for the airline through a combination of job cuts, wage concessions and changes to working conditions.
Air Canada lacks the cash to cover all the financial obligations it has amassed since obtaining court protection from creditors on April 1, the Ernst & Young report said.
On Friday, the pilots association offered to cut their annual costs by more than C$250 million, according to association spokesman Serge Beaulieu.
Beaulieu offered no details of the offer except to say it included job cuts and salary reductions similar to those made by the other unions.
Air Canada management hopes a new deal with its workers and creditors will allow it to restructure its operations. The airline plans to fly fewer big jets and buy about 85 regional jets that are cheaper to operate and more suited to its reduced passenger traffic.
The airline, created as a government-owned carrier in 1937 and privatized in the 1980s, is considered a national symbol by the Canadian government, which is unlikely to let it die.
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