July 20, 2009 / 9:08 PM / in 8 years

Air Canada unions lobby Ottawa for full loan

VANCOUVER, British Columbia (Reuters) - Several of Air Canada’s employee unions want the Canadian government to put up all of the C$600 million ($545 million) the cash-strapped carrier needs to meet immediate financial obligations, and shut out private lenders.

The unions are concerned that lucrative landing slots, which it said the company has proposed putting up as part of collateral for loans, could end up in private hands and then be sold, said Katherine Thompson, spokeswoman for the Air Canada component of the Canadian Union of Public Employees (CUPE).

Losing these slots, especially at a key international hub like London’s Heathrow Airport, could jeopardize the airline’s future, Thompson said.

“(Landing slots) are the crown jewels of Air Canada. Once they are lost, they can’t be bought back,” she told Reuters.

“What we want is for the government to provide the fully secured loan and in exchange they would hold control over those slots.”

Thompson, whose union represents 6,800 flight attendants at Air Canada, said the loss of landing rights could be the death knell for the already financially troubled carrier.

“We have the benefit of hindsight. TWA went through the same scenario,” she said.

Trans World Airlines, or TWA, beset by financial problems was bought by American Airlines in 2001 after it filed for bankruptcy for the third time.

Currently, Ottawa is expected to lend Air Canada between C$200 million and C$250 million of the C$600 million it says it needs.

ACE Aviation Holdings Inc, the airline’s parent, is expected to put up another C$150 million. The aviation arm of General Electric is also part of the lending consortium, Thompson said, but not Canadian Imperial Bank of Commerce as had been speculated.

A Finance Ministry spokesman said they were aware of the unions’ concerns. “No decision has been taken on the government’s side on how to solve this particular issue,” he said. Air Canada was not immediately available for comment.

Representatives of CUPE, as well as members of unions representing Air Canada’s pilots and customer service and sales agents, traveled to Ottawa last Friday to take their concerns to Finance Minister Jim Flaherty, Thompson said.

Last week, the fifth of Air Canada’s five employee unions ratified a new labor agreement and a pension funding freeze, important steps to help keep the airline from filing for bankruptcy for the second time in six years.

($1=$1.11 Canadian)

Reporting by Nicole Mordant; editing by Rob Wilson

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