The Vancouver 2010 Winter Olympics have become a bargaining chip at Air Canada as the country's largest airline tries to overcome labour strife and avoid filing for bankruptcy protection.
Air Canada mechanics and technical staff, worried about losing their jobs to El Salvador, narrowly voted down a tentative 21-month labour pact that had been recommended by union negotiators, throwing the cash-strapped carrier's recovery strategy into jeopardy.
Chuck Atkinson, president of the union's District 140, said his members are hoping that the airline will offer job protection in return for labour peace during the Winter Games in February, 2010.
"It might be a black eye for Canada if there were a strike during the Olympics or if Air Canada went into bankruptcy protection before then," Mr. Atkinson said in an interview.
The surprise rejection of the labour pact thwarts Air Canada's plans to ask Ottawa for pension relief and blocks $600-million in loans required to avoid a filing for bankruptcy protection for the second time in six years. Export Development Canada, a federal Crown corporation, had been expected to lend about $250-million to help the airline survive the recession.
The International Association of Machinists and Aerospace Workers said Wednesday that it will return to the bargaining table later this week, with the aid of federally appointed mediator James Farley, a former Ontario judge.
Members of the IAMAW's largest bargaining unit will be asked to vote again, assuming the mediator is able to persuade management and labour negotiators to agree on a revised collective agreement.
Lorne Hammerberg, president of IAMAW Local 714, said many employees believe Air Canada is ignoring the contentious issue of whether aircraft repairs and maintenance will be shifted to El Salvador, where a sister company of Air Canada operates. Mr. Hammerberg said the union would gain bargaining clout as the Games approach.
"Everybody's focused on the Olympics for a potential strike," he said. "Air Canada is an Olympic sponsor, and our members wonder if it wants the 21-month contract to counter any labour dispute during the Games. It wouldn't be just about Air Canada. All the eyes of the world would be upon us, and a labour disruption would be the last thing both the company and Canadian government would want."
Montreal-based Air Canada declined to comment on a potential walkout, but in a statement, the carrier said that given the voting results, "the company and the IAMAW will meet promptly to discuss next steps in the process."
The "Official Airline" of the 2010 Games needs the support of all of its unions to ask Ottawa for permission to skip a $100-million pension payment due on July 30, another $60-million due on Aug. 14 and suspend further contributions until April 30, 2011. Air Canada faces a $615-million pension bill this year, but wants to defer $355-million of its scheduled contributions.
Vancouver organizers said last night that "it would be inappropriate to comment on internal discussions under way at the airline. Air Canada is a strong partner for the 2010 Winter Games and we have full confidence in their partnership with us."
Air Canada is in talks to borrow $600-million, but the lenders first want assurances that the airline has been granted relief in reducing its $2.9-billion pension solvency deficit, the carrier said in a letter this week to retirees.
"The federal government is concerned about the Air Canada situation and is monitoring it closely," a spokesman for Finance Minister Jim Flaherty said in a statement Wednesday night.
The IAMAW's technical, maintenance and operational support unit voted 50.8 per cent against a pact that would have frozen their wages until March 31, 2011. Mechanics, baggage handlers, cargo agents and electricians are part of the unit, which has more than 11,000 members.
The previous six-year labour contract expired Tuesday, and IAMAW negotiators had urged members to ratify the proposed 21-month collective agreement.
But shop stewards in Montreal disagreed, telling employees to vote against the tentative deal. The Montreal district's strong No vote was enough to offset support in other parts of Canada, and the Quebeckers also benefited from a low voter turnout of well under 50 per cent nationally, union sources said.
"Some workers figured if they're going to lose their jobs, they may as well take the company down with them," said one union representative.
Aveos Fleet Performance Inc., formerly named Air Canada Technical Services, has more than 1,400 employees in San Salvador. An Aveos spokesman said in an interview two weeks ago that there are no plans to transfer Air Canada plane repair contracts out of Canada.
Two smaller IAMAW units, with roughly 600 workers combined, overwhelmingly supported their proposed contracts, with finance staff voting 87.5 per cent in favour and clerical workers voting 93.2 per cent to ratify.
While the largest IAMAW unit rejected its tentative deal, if the votes of all three units are combined, then there would be a narrow approval of the pension funding moratorium, said one industry official, warning that a filing for protection under the Companies' Creditors Arrangement Act is edging closer.
"If the mechanics refuse to see the facts, the airline might not survive until the Olympics. The easiest thing for management to do is to file for CCAA, but the losers would be the pensioners and employees," the official said.
Two other Air Canada unions, representing customer service agents and dispatchers, have already ratified their 21-month labour agreements. Another two unions, representing pilots and flight attendants, are scheduled to wrap up their ratification votes by mid-July.
With reports from Ian Bailey in Vancouver and Gloria Galloway in Ottawa