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(New throughout, adds reaction from union, opposition party)
By David Ljunggren
OTTAWA, March 24 (Reuters) - Canada announced on Thursday it would give Air Canada more leeway to decide where its planes are maintained, prompting union protests that the move could cost thousands of jobs.
Transport Minister Marc Garneau said Air Canada, currently bound by a 1988 law spelling out where in Quebec, Manitoba and Ontario it must carry out maintenance, needed more flexibility to be competitive.
He unveiled proposed changes to the law, known as the Air Canada Public Participation Act, that would give Air Canada more say in deciding where the work is done and permitting some to be carried out abroad.
"We're allowing Air Canada to compete internationally in this respect because ... it is important for them to be able to play on more of a level playing field," Garneau told reporters.
Quebec, citing the original act, had launched a lawsuit against Air Canada for not doing enough maintenance in the province. It dropped the case last month after the airline agreed to buy jets from Montreal-based Bombardier Inc and service them in Quebec for 20 years.
The International Association of Machinists and Aerospace Workers said it would press the federal Liberal government to change its mind.
"The Liberals are on the verge of changing a law which will confirm the loss of thousands of jobs ... they have just given carte blanche to Air Canada," the union's Quebec coordinator David Chartrand said in a statement.
A spokesman for Garneau said the 1988 act was outdated and in places referred to facilities and jobs that did not exist anymore. He also noted Air Canada had struck a separate deal last week with Manitoba to end litigation over the amount of work done there.
The ruling Liberals have a majority in the House of Commons and the legislation looks certain to be adopted after it has been studied.
Tom Mulcair, leader of the left-leaning opposition New Democrats, told reporters in Ottawa the new rules meant the airline could get away with doing very little work in Canada.
Air Canada wants an end to the 1988 act, which limits foreign ownership to 25 percent and obliges the carrier to operate in both of Canada's official languages and keep its headquarters in Montreal.
Garneau made clear last month these particular stipulations would remain the same. (Reporting by David Ljunggren; Editing by W Simon and David Gregorio)