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CEO: More layoffs, pay cuts needed

7,109 more job cuts sought in concession talks

Judge warned airline, workers to reach deal quickly

SUSAN PIGG

BUSINESS REPORTER

Air Canada needs 7,109 more layoffs, immediate 10 per cent pay cuts and major work-rule concessions if it hopes to keep flying in the long term, union officials were told during a face-to-face meeting here yesterday with chief executive Robert Milton.

"It was a very serious meeting. There was no laughter, no smiles. We'll be bargaining all weekend," said Gary Fane, head of the transportation union of the Canadian Auto Workers Union, which represents ticket and reservations staff at the ailing airline.

The 3,600 layoffs that have already been announced by the struggling airline are no longer enough, leaders for Air Canada's five unions were told during the 1 1/2 hour meeting at the Fairmont Royal York Hotel yesterday afternoon. Each union has a week to agree to a host of demands specific to their members — outlined in great detail in documents they were allowed to take away, on condition they not be made public — including a total of 7,109 more layoffs over three years, work-rule revisions and major pension plan changes that will only affect employees who retire after July 31.

"We know exactly what they're looking for now. There were a number of surprises, no doubt about it," said one union official who refused to comment further, out of respect for a news blackout imposed on the critical labour talks by Mr. Justice Warren Winkler, the court-appointed facilitator charged with trying to help the company and its unions reach a deal on concessions quickly.

There was considerable confusion among union leaders after the meeting on exactly how many additional employees face layoff, with numbers ranging from a total of 7,500 — including the 3,600 already announced — to the total of 10,709, which represents about 25 per cent of airline's total staff.

"We need to look at everything on paper because it all happened so quickly," said a union official.

Air Canada spokesperson Laura Cooke refused to comment on the talks, saying the airline intends to respect Winkler's request for a media blackout.

Yesterday's meeting came after Mr. Justice James Farley, the Ontario Superior Court judge overseeing Air Canada's restructuring, warned that the two sides need to move quickly or risk seeing the carrier fail and foreign carriers move in to the fill the gap. The company was ordered to come up with a realistic list of demands based on need, not greed, and the unions have been warned that there's no time to waste.

The meeting didn't start until 2.30 p.m. yesterday to give Milton time to deliver a speech at the Sheraton Hotel, organized months ago, at which he told the business crowd that Air Canada would be eligible for about $1 billion in government help if it was a U.S.-based carrier, yet the struggling airline has received just $61 million from Ottawa so far.

In total, Washington has offered $30 billion in aid or relief to U.S. carriers since the Sept. 11, 2001 terrorist attacks, while Ottawa has given just $100 million to Canada's also hard-hit industry, said Milton.

"We appreciate that, but it's a totally unlevel playing field and there are ramifications to that," he said in response to a question from the crowd, stressing that Air Canada competes with many of those subsidized U.S. carriers on about two-thirds of its routes.

Acknowledging he has had his head "bludgeoned in over the years" for criticizing Ottawa's lack of support for Air Canada, Milton was relaxed, and restrained, when asked how much government is to blame for the airline's problems.

Air Canada was forced to seek protection from its creditors on April 1 after being hit by more than $2 billion in losses over the past two years as a result of a drastic downturn in business travel, followed by a downturn in air traffic as a result of the terrorist attacks, the U.S-led war with Iraq and the fallout of SARS.

Ottawa has been under intense pressure from the Air Transport Association of Canada to forgo airport rents and remove security surcharges and other fees that would give the airline industry more than $600 million in immediate relief. But the federal cabinet is split on the issue.

Recently, Washington reimbursed $2.3 billion (U.S.) that U.S. carriers have paid in security surcharges and announced they won't have to resume paying security fees until September.

"We continue to advocate — and frankly we're frustrated and getting increasingly concerned — that the government just has to back off on some of the special charges and taxes that they've been putting on the industry," said Cliff Mackay, chief executive of the umbrella group for airlines. "This is the worst crisis that the Canadian air transportation industry has faced in its history and the government still is continuing to behave as if none of this is real and they're entitled to all of their revenues, no matter how outrageous that is. I think it's because we're in the dying days of (the Chrétien) government and they're not accountable to anybody."