Air Canada reaches deal with flight attendants

Mon Jun 22, 2009 1:14pm EDT
 
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By Nicole Mordant

VANCOUVER, British Columbia (Reuters) - Air Canada reached a tentative labor agreement on Monday with its last hold-out union, removing an important obstacle in the cash-strapped airline's bid to line up financing to stave off bankruptcy.

Shares in Air Canada, Canada's biggest carrier, turned positive after a deal to extend its current contract with its flight attendants was announced. But an analyst said labor peace is just one of several boxes the airline needs to check to avoid filing for bankruptcy for the second time in six years.

"As of now they are not out of the woods yet. The labor agreement is just the first step in a multi-step process," Research Capital analyst Jacques Kavafian said.

Key to Air Canada's future is its ability to raise fresh financing to pay off debt. The airline has repeatedly said lenders require labor peace before they will consider loans, so its move to extend all its union contracts was crucial.

Another important prong will be how well the airline performs financially over the important summer vacation period.

Kavafian said that June "will probably not be a good month" but that July and August could be "pretty good" based on advance bookings and prices.

Air Canada's B shares were up 2 Canadian cents at C$1.55 on the Toronto Stock Exchange early on Monday afternoon. Its variable voting A shares were 1 Canadian cent firmer at C$1.56, bucking an overall market that was down more than 3 percent.

DEAL WITH FLIGHT ATTENDANTS   Continued...

 
<p>Air Canada planes sit on the tarmac at Pearson International Airport in Toronto, June 17, 2008. REUTERS/Mike Cassese</p>