"Final" Deadline Saturday midnight

[Tango Niner]

24 hours is plenty of time to hammer out a solution - IF both sides are willing to deal. Best of luck to all.

T9

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Bankruptcy looms for Air Canada

By DAVID PADDON

TORONTO (CP) - Air Canada and its main pilots union were given an "absolute" deadline to have a deal by midnight Saturday night or face the real possibility that Canada's biggest airline could end up bankrupt, and presumably, stop flying.

"This matter must be stabilized now. Emphasize 'now.' Immediately," Justice James Farley, who has been overseeing the insolvent airline's restructuring, said in Ontario Superior court Friday afternoon.

Farley said that if no deal is reached by the "absolute" deadline he set of midnight Saturday, lawyers for all parties would be back in court early Sunday morning to discuss the airline's options and "whether or not Air Canada should be assigned into bankruptcy or failing that some other reasonable, practical alternative."

Farley ordered the two sides to begin talks with the help of Justice Warren Winkler at 6 p.m. EST in a Toronto hotel. Winkler, a former labour lawyer before he became an Ontario judge, was involved in resolving negotiations between the company and other unions but hadn't been part of the most recent talks with the pilots.

Farley said Air Canada is in an "ultra precarious" position and if there are more delays all that will be left of the carrier is an "academic debate over the bones, once the buzzards have picked them over."

Air Canada lawyer Sean Dunphy refused to say whether the company's board of directors would shut the airline down, telling reporters during a break that "we'll keep flying until the court orders otherwise."

In a statement issued late Friday, Air Canada told customers that "it's business as usual with all flights operating as scheduled."

However, Dunphy also said there was no way for the airline - which owes more than $12 billion and is losing about $5 million a day - can successfully restructure unless it gets its labour costs in line with its revenues.

A lawyer for the Air Canada Pilots Association, on the other hand, told reporters he doesn't believe somebody will "turn out the lights" on Air Canada and that "somebody will find a way" to reach a deal.

The key sticking point, according the pilots lawyer Richard Jones, was the airline's plan to grow its Jazz subsidiary over several years and shrink the main airline, where his clients work.

Jones said the pilots union had made a proposal to the carrier Friday morning as an alternative way to achieve the company's annual savings target from the pilots.

However, Dunphy said that figure had been achieved using "imaginative" calculations and insisted that the two sides remained far apart in terms of the cost-savings in the two proposals.

"They're not even close. They're less than a quarter of the way there," Dunphy said.

Union spokesman Serge Beaulieu, speaking from a nearby hotel where talks were being held even as the courtroom drama unfolded, said the union made a proposal Friday morning to cut Air Canada's annual costs by $251.2 million, "which is the target given us."

Beaulieu did not give details but said the package would involve salary reductions and job cuts, similar to those accepted by other unions.

"It covers the whole gamut. Basically, a great big knife all over the place, like everybody else did," Beaulieu said.

Other reports have said more than 800 jobs could be lost from the union, which has more than 3,100 members.

In its statement, Air Canada said the proposal from the pilots included temporary wage cuts but didn't include the necessary productivity improvements.

"The proposal was significantly below the required target for this labour group and it could not be accepted as it would have placed in jeopardy the recently completed tentative agreements with the other eight unions at Air Canada and Air Canada Jazz," the airline said.

Although one of Air Canada's unions called on the federal government to step in to help the airline and the struggling airline industry, a spokesperson for Transport Minister David Collenette said the minister was in his Toronto riding Friday and wouldn't comment on the Air Canada situation.

The uncertain situation led the Toronto Stock Exchange to halt trading of Air Canada stock early Friday afternoon. Trading halts are common when a company is expected to release important news that may affect the value of shares.

Air Canada's shares (TSX:AC) last traded at $1.67, down eight cents, with more than five million shares exchanged Friday. If the company goes into bankruptcy its shares will be nearly worthless.

While Air Canada sees that "it's very understandable that customers are worried," airline spokeswoman Isabelle Arthur said the carrier has made progress in its restructuring which began when it filed for bankruptcy protection on April 1.

"We have reached agreements with all of our unions except for the pilots and we're hopeful discussions will be successful and allow us to restructure our labour costs as necessary."

But a court-appointed monitor's report Thursday said the lack of a deal with the pilots threatened to undermine tentative cost-reduction accords with the company's eight other unions.

The monitor's report said the concessions of the other unions and non-union employees, worth a total of $766 million a year, could be undone if the pilots union and Air Canada don't land an agreement.

On Friday, a lawyer representing all the unions except the Air Canada Pilots Association, asked Farley to order that they be kept informed in the event that the airline is assigned into bankruptcy - a move that could see the airline stop operating and its assets sold and the money distributed among its stakeholders.

"This is the least we could ask for at this time," he said.

Meanwhile, the national president of the Canadian Union of Public Employees, which represents 8,300 flight attendants at the carrier, slammed the federal government "for abandoning the airline industry."

"The federal government has washed its hands of this mess yet its airline policy is responsible for the current chaos and much of the pain our members are suffering today," CUPE president Judy Darcy said in a statement from Ottawa.