Air Canada, Unions Miss Bank Deadline

Air Canada failed to reach agreement with all its unions on additional cost cuts, missing a midnight deadline imposed by Deutsche Bank as a condition for financing aimed at lifting the airline out of bankruptcy.

Six of the nine bargaining units agreed to the cuts, the airline said in statements. Talks continue in Toronto with the other unions, including the Canadian Union of Public Employees and the Canadian Auto Workers, the Montreal-based airline said.

Deutsche Bank, Europe’s second-largest lender by assets, said it needed $144 million more in cost savings to help Air Canada meet a $792-million cost-cut target. The bank imposed the cuts as a condition for underwriting a $612-million rights offering.

“There’s going to be a degree of flexibility,” said Karl Moore, a McGill University business professor who follows the airline industry. He doesn’t own shares in Air Canada. “Deutsche Bank is going to be patient while they’re still meeting and holding talks.”

Air Canada was counting on Frankfurt, Germany-based Deutsche Bank after Hong Kong investor Victor Li withdrew his investment last month because, he said, the unions weren’t giving enough. Without the Deutsche Bank financing, the carrier may be liquidated.

Air Canada said it reached agreement with the Canadian Airline Dispatchers Assn., which represents dispatchers. Tentative agreements also were reached with the Air Canada Pilots Assn., which represents 3,000 pilots, and the International Assn. of Machinists and Aerospace Workers, which represents 14,500 ground crew, cargo and clerical staff workers.

The carrier said Friday that it had reached an agreement with pilots of its Air Canada Jazz airline. Air Canada Jazz said Sunday that it had reached tentative agreements with Teamsters Canada, which represents its flight attendants, and the Canadian Airline Dispatchers Assn.

John Reber, a spokesman for Air Canada, said the carrier “remains confident we will meet the conditions of the Deutsche Bank agreement.”

Alejandra Bravo, spokeswoman for the Canadian Union of Public Employees, which represents flight attendants, and Gary Fane, spokesman for the Canadian Auto Workers, which represents call center staff and ticket agents, said talks were continuing.

The airline had met a key condition of Deutsche Bank’s plan Friday by gaining tentative approval from Canada’s pension regulator on its proposal for filling a $1.1-billion pension plan shortfall.

General Electric Capital Aviation Services, a finance unit of General Electric Co., has said it would withdraw $1.4 billion in financing it had committed to Air Canada unless the Deutsche Bank plan satisfied all of its conditions. Under the rights offering, creditors would have the option of buying shares in the restructured airline.

Air Canada has operated under protection from creditors since April 1, 2003, after accumulating more than $8.6 billion in debt and leases.

Ted Meyer, a Deutsche Bank spokesman in New York, declined to comment.