Toronto — The president of the Canadian Auto Workers union has rejected the latest concession demands from Air Canada — concessions the insolvent airline says are essential if it is to restructure financially and avoid possible liquidation.
After an intense day and night of bargaining on Monday, Mr. Hargrove issued a news release just before midnight EDT stating that the concessions demanded by Air Canada "are simply too heavy for our members to bear."
He said the additional concessions would mean an annual pay cut of about $10,000 per employee.
"When the salary range is between $35,000 and $49,000, this is asking too much of workers who have already given back to this company $165-million in concessions last year at this time."
The CAW's refusal to budge came after the Canadian Union of Public Employees, representing Air Canada flight attendants, had agreed to wage cuts in a tentative deal earlier Monday.
That left only the Canadian Auto Workers, representing 4,700 customer service employees at the airline, holding out as Air Canada pressed for $200-million in annual savings from its various unions.
The cost reductions are a condition in Air Canada's financing agreement with Deutsche Bank, under which the German financial institution is to underwrite an $850-million equity offering for the airline.
"It's going to be painful for our members," Pamela Sachs, president of CUPE's Air Canada component, said of the tentative agreement, which followed marathon talks in the face of a May 15 deadline Deutsche Bank had set. Air Canada (TSX:AC) reached cost-cutting deals with several other unions during the weekend.
The Deutsche Bank agreement is also a key to Air Canada's $1.5-billion (U.S.) financing agreement with GE Capital Aviation Services. The GE unit has said it could drop its funding if Deutsche Bank withdraws.
Analysts suggest that if Air Canada's arrangements with Deutsche Bank and GE fall through, the airline will have difficulty in finding a new investor and may face liquidation.
Hong Kong businessman Victor Li and his Trinity Time Investments cancelled a planned $650-million equity investment in the airline last month after failing to persuade the unions to accept changes to their pension plans.
