Pilot pact a win for Air Canada but pensions still vex

Tue Jul 31, 2012 3:00pm EDT
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Nicole Mordant

VANCOUVER (Reuters) - A new labor contract with its pilots gives Air Canada, the country's biggest airline, more leeway as it tries break clear of increased competition and return to profit, and its shares rose on Tuesday.

A Canadian government-appointed arbitrator said in an 82-page ruling released late on Monday that he had selected the airline's contract proposal over one submitted by its pilots union because it would better ensure the economic viability and competitiveness of Air Canada.

The Air Canada version of the contract allows it to outsource more flying to other companies -- a concept known as scope -- and also to establish a low-cost subsidiary, both of which should help it to cut costs.

"The most surprising aspect, and very positive, was the final conclusion around scope," PI Financial transportation analyst Chris Murray said.

"It should make for a more effective operation and financially they're performing as well," he said.

The contract also raises the contribution that pilots' make to their pensions, a move that will help Air Canada reduce its massive C$4.4 billion ($4.39 billion) pension deficit, the servicing of which nearly tipped it into bankruptcy in 2009.

The airline did sink into bankruptcy in 2003 and has been profitable for only one year out of the past 10 as it deals with stiffer competition and higher fuel costs.

Air Canada's stock is down 50 percent in the past year, hurt by worries about strikes and the possibility that it could again seek bankruptcy protection.   Continued...

An Air Canada plane lands in front of a United plane at the Calgary International Airport in Calgary, Alberta, June 17, 2008. REUTERS/Todd Korol