VANCOUVER (Reuters) - Air Canada Inc and striking customer service workers reached a tentative contract agreement on Thursday, settling on a compromise on the biggest obstacle to a deal: the issue of pension benefits and who should pay for them.
Air Canada’s almost 4,000 unionized airport check-in and call-center staff will return to work on Friday after going on strike early on Tuesday.
With the threat of government back-to-work legislation hanging over them, Air Canada, the country’s biggest airline, and the Canadian Auto Workers (CAW) union agreed to put the issue of whether new hires should have a defined-benefit pension plan to binding arbitration.
Defined benefit plans are typically paid for by companies and are becoming rarer as employers struggle to fund yawning pension shortfalls and look to switch employees to self-funded defined contribution plans.
Air Canada, which has a market value of C$560 million ($572 million) and a pension deficit of about C$2.1 billion, was pushed to the edge of bankruptcy two years ago by heavy pension funding demands.
Under the tentative contract deal, existing employees’ defined benefit plans will see only “very slight modifications”, starting in 2013, and they will not suffer the large reductions that the airline wanted, CAW President Ken Lewenza told a news conference.
“The defined benefit plans that we have bargained collectively for the past 40 years ... are completely intact,” Lewenza said.
He said he regretted not being to get the same guarantee in with the airline for new hires, but added that it was in the best interest of union members not to prolong the strike.
He declined to detail the wage increases agreed to in the four-year contract, but called them “very good”. Other media reported the increases at 9 percent over four years.
“The agreement will help ensure the long-term sustainability of Air Canada while maintaining industry-leading compensation and benefits for our employees,” said Duncan Dee, Air Canada’s executive vice-president and chief operating officer.
Air Canada’s stock soared nearly 9 percent to as high as C$2.19 after news of the tentative deal, later closing at C$2.17 for a gain of 16 Canadian cents.
A two-week union ratification vote starts on Monday.
Lewenza said it was not the government’s threat of back-to-work legislation, a move he described as an assault on workers, that speeded up an agreement.
The House of Commons formally introduced legislation on Thursday to end the strike and also debated a motion to speed it through.
Air Canada had deployed 1,700 of its managers at airports across Canada to take the reins at check-in and ticketing desks, and diverted customer calls to centers in the United States. Disruptions appeared to be minor and mostly confined to flight delays.
The Montreal-based company is also in contract talks with four other unions, including its pilots, flight attendants and maintenance workers, after agreements expired earlier this year.
Ottawa’s move to legislate striking employees back to work signals that no other Air Canada union “will be able to strike for any length without triggering a similar move by the government”, National Bank Financial analyst Cameron Doerksen said in a note to clients.
Additional reporting by Randall Palmer and Louise Egan in Ottawa and Allison Martell in Toronto; editing by Peter Galloway and Rob Wilson