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(Reuters) - A Canadian government-appointed arbitrator chose to enforce Air Canada's final offer over one proposed by the union representing its 3,000 pilots, both sides said on Monday, ending a long and bitter contract dispute.
Air Canada, Canada's biggest airline, said the agreement preserve compensation and benefits near the top of industry levels and helps to ensure the sustainability of the company's defined benefit pension fund.
"At the same time, it provides the company with the necessary flexibility to compete effectively in the current industry environment," Air Canada Chief Executive Calin Rovinescu said in a statement.
The Air Canada Pilots Association (ACPA), which has been in on-off talks with Air Canada for more than a year, was, however, swift in condemning the decision by arbitrator Douglas Stanley.
"Air Canada pilots are angry at the way they have been treated by the government and their employer. The results of this arbitration will only add to their disillusionment, creating a drag on Air Canada's future performance," ACPA said in a statement.
The five-year collective agreement will run until April 1, 2016. The previous agreement expired on March 31, 2011.
A key issue in the talks was money-losing Air Canada's desire to launch a separate discount airline, which it says is crucial to future profitability. Pilots strongly oppose the plan, fearing it puts their job security and benefits at risk.
Canadian Labour Minister Lisa Raitt appointed Stanley in May after the Canadian government halted in March a planned work stoppage at Air Canada sparked by the airline's decision to lock out its pilots after negotiations failed to reach a deal.
The government passed legislation to prevent Air Canada's pilots, as well as its mechanics and baggage handlers, from striking and the airline from locking them out.
That legislation sent contract disputes for the two unions to binding arbitration.
ACPA said federally-imposed arbitration could not bring about the "energized and motivated professional pilot group Air Canada needs to succeed."
"Instead, arbitration has imposed work rules that will cost many pilots their jobs, demoralize the rest and kick other important issues years down the road, where they will fester and undermine any effort to achieve positive culture change at our airline," ACPA president Paul Strachan and chairman Jean-Marc Belanger said in a statement.
Air Canada said it will not comment further on details of the new agreement while it is discussing it with its employees.
Additional reporting by Susan Taylor in Toronto; editing by David Gregorio and Andre Grenon