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OTTAWA (Reuters) - The Canadian government appointed two mediators on Wednesday to help Air Canada and the union representing its flight attendants to reach a labor agreement.
The Canadian Union of Public Employees, which represents about 6,700 flight attendants at the country's biggest airline, said talks broke off early Tuesday because the cash-strapped carrier's proposals would reduce wages for some staff and lead to job losses for others.
CUPE is the lone holdout in contract talks as the company's four other unions have reached tentative deals that will freeze wages and pension benefits for 21 months.
The government named former Ontario Superior Court Judge James Farley, already working to settle pension disagreements between the airline and its unions, and Quebec's regional director of the federal mediation and conciliation services, Jacques Lessard, as the mediators. They have until noon on Monday June 22 to work out a labor deal.
At that time they can make recommendations for the settlement of any remaining differences between the parties.
Labor and pension moratorium agreements are key to Air Canada securing fresh financing, which the heavily indebted airline hopes will help it avert a second bankruptcy filing in six years.
"In light of the seriousness of Air Canada's situation, it is in the best interests of both sides to resolve their differences quickly," said Minister of Labour Rona Ambrose.
CUPE said it welcomed mediation.
"Talks have broken down and we're not communicating," said Katherine Thompson, president of the Air Canada component of CUPE. "Obviously there needs to be some kind of step forward if the pension package is also to be ratified," she told Reuters in an interview.
All five unions have reached tentative agreements with Air Canada on a 21-month funding moratorium on the airline's C$2.9 billion ($2.56 billion) pension deficit. In exchange, they will get a 15 percent equity stake in the airline and the right to appoint one representative to the board of directors.
To take effect, the pension agreements require the approval of union members and federal regulators.
In addition to a moratorium on past service pension contributions until the end of 2010, payments into the fund will be fixed at C$150 million, C$175 million, and C$225 million for 2011, 2012 and 2013, respectively.
Battered by a sharp downturn in demand and intense competition, Air Canada has asked federal financing agency Export Development Canada for a commercial loan of about C$200 million, a third of the C$600 million it said it needs in the short term.
The loan, which would be negotiated on a commercial basis, would not be considered as a bailout by the government. The government would take on the risk, while EDC would administer the loan.
Separately, pilots at low-fare rival WestJet Airlines Ltd ratified a four-year labor deal, Canada's second-largest carrier said on Wednesday without divulging details of the agreement.
WestJet's pilots association said in a statement that the agreement, which takes effect July 1, will provide the company and its pilots with stability to weather the industry downturn.
Air Canada class A shares dropped 3 Canadian cents to close at C$1.57 on the Toronto Stock Exchange on Wednesday, and its class B shares dipped 3 Canadian cents to C$1.59 amid broad market declines.
Reporting by Susan Taylor; editing by Rob Wilson