Globe And Mail @ 1207am

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Air Canada talks continue past deadline

Toronto — Talks between Air Canada and its pilot union will continue through the night.

Despite a court-imposed midnight deadline, it appears the company and the pilots union will carry on negotiations into the morning hours, Air Canada spokeswoman René Smith-Valade told Globe and Mail Update shortly after midnight Saturday.

"The talks are continuing," she said. She could not say how the proceedings had gone until that point.

"Air Canada Jazz is on the way to becoming Canada's national low cost carrier," Nick Di Cintio, Chairman of the pilots association for Air Canada's discount line Jazz told a press scrum around the same time. Jazz pilots have already reached an agreement with the airline.

The main pilots group, the Air Canada Pilots Association, is negotiating separately, but the Jazz pilots have been brought into those discussions, CBC reported.

"I am sure we will be a viable company tomorrow. The pilots have too much to lose," Donna Saull, a flight attendant with Air Canada, told Globe and Mail Update as the clock ticked to midnight.

"The pilots will work very hard," she said. "If they sign, I'll be cheering. We, the people who keep the front lines open, hope the directors and vice-presidents give up as much of their lifestyle as they have asked us to give up."

Travellers are nervous about what happens if they can't resolve their differences.

"It's almost overwhelming, the number of calls that we're getting. And I'm sure every travel agency is the same," Richard Vanderlubbe, co-owner of Tripcentral.ca, said Saturday afternoon from Burlington, Ont.

"The real problem is, we don't know quite what to say - other than go to the airport and expect service as normal," Mr. Vanderlubbe said.

Air Canada's Rene Smith-Valade said the airline's operations were normal for a Saturday, although its call centres had received numerous inquiries from customers.

Air Canada has been operating under court-protection from its creditors since April 1, which means that none of its assets can be legally seized without court approval and the airline's suppliers, creditors and unions are obliged to continue business as usual while the company works on a long-term business plan.

Several deadlines for tentative labour contracts have passed but the Air Canada Pilots Association, representing more than 3,100 members, remains the only one of nine Air Canada unions without a tentative contract.

On Friday, Justice James Farley ordered the two sides back to the table and told them to have a deal by midnight Saturday night.

Justice Farley had warned that if they don't, he would hold a rare Sunday hearing at 8 a.m. to consider more drastic measures.

One possibility he would consider would be some sort of court order imposing a deal - although legal observers have said this would likely be challenged by the pilots union and probably other unions as well, since there's little or no precedent for such a move under Canadian law.

An even more daunting possibility would be for Air Canada to be petitioned into bankruptcy - meaning its assets may be seized and/or sold by creditors, its current board of directors and senior management would likely be ousted and there's a good chance the airline would stop operating.

Air Canada lawyer Sean Dunphy told reporters on Friday that "we'll keep flying until the court orders otherwise."

While he wouldn't say outright that bankruptcy was under consideration, he 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.

On Friday, Air Canada president and chief executive Robert Milton issued a message to the airline's employees, asking them "to be patient with each other."

"Our company's existence is not being challenged by the failures of our employees but rather we face a radically different marketplace than we faced when we came into being 65 years ago, or even a decade ago," Mr. Milton said.

"But, as we go forward, we need to do it together and so I would ask you today to be understanding of our pilots. They too want to come to an arrangement which will enable this airline to prosper."

Many people, including Air Canada employees and industry observers, have said in recent days they can't imagine there won't be a deal or that Canada's biggest airline would cease flying.

"It's so big that no one can even fathom what would happen if they did cease operations," Mr. Vanderlubbe said, adding his customers continued to book flights on Air Canada despite the uncertainty.

"At least, if they were going on strike as they have in the past, you would know at some point they would settle this thing and move on. But it's a real big question mark right now," Mr. Vanderlubbe said.

Another union representing pilots at the company's Jazz regional subsidiary, who fly mainly turboprop planes and small jets, reached a deal with the company last weekend.

However, a lawyer for the main pilots' union said a key sticking point in negotiations Friday was the company's plan to boost the size of Jazz, its regional subsidiary, and shrink the main fleet flown by his clients.

In particular, the larger Air Canada Pilots Association has balked at a plan to have all regional jets with up to 75 seats to be flown by Jazz pilots starting next April and for each of the two pilot unions to bid on who will fly new regional jets with 76 to 110 seats that the airline hopes to introduce in coming years.

Richard Jones, lawyer for the main pilots union, said his clients had submitted a proposal on Friday morning that would have found other ways for the ACPA pilots to reduce their costs by $250-million - just short of the amount Air Canada was seeking.

But Mr. Dunphy said the ACPA figures had been achieved through "imaginative accounting" and "they're not even close. They're less than a quarter of the way there."

The report by the court-appointed monitor assigned to the Air Canada restructuring 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.