Air Canada seeking $600-million loan - The Globe and Mail
Globe and Mail update, Monday, Jun. 15, 2009 02:05PM EDT
Air Canada (AC.B-T1.490.021.36%) is seeking a $600-million loan from a group of lenders, including Ottawa.
Three of the airline's five unions agreed last Monday night to new 21-month collective agreements that would expire in the spring of 2011, but those pacts are subject to the carrier's ability to secure new financing, union officials have told members at ratification meetings.
The federal government would play a minority role in its contribution in the lending syndicate, union officials say.
Air Canada needs new financing to help it stay above an $800-million minimum cash balance required by a credit-card processor to keep payments flowing from passengers. If the Montreal-based carrier isn't able to secure new loans, analysts say it could be forced to file for bankruptcy protection for the second time in six years.
As well, Air Canada's top officers would see their salaries frozen - with no bonuses - until the spring of 2011, coinciding with the union members' wage freeze. And there would be no improvements to executive pension plan benefits through 2013.
Under the tentative labour pact, Air Canada shares will also be distributed to its unions: International Association of Machinists and Aerospace Workers, Air Canada Pilots Association, Canadian Union of Public Employees, Canadian Auto Workers and the Canadian Air Line Dispatchers Association (CALDA).
Unions would be awarded shares to be credited to the pension plan, which has a $2.9-billion solvency deficit.
The IAMAW, CAW and CALDA are urging employees to ratify the tentative agreement and help cash-strapped Air Canada avoid filing for bankruptcy protection.
Those three unions are supporting management's proposal for the company to defer most of its pension contributions until the spring of 2011. The Air Canada Pilots Association and the Canadian Union of Public Employees, which represents flight attendants, continued to say they are hoping for a breakthrough this week, but remain in contract talks with management under federal mediator James Farley.
Ottawa must still approve a proposed pension-funding moratorium