09/17/2011 04:00 EDT | Updated 11/17/2011 05:12 EST

Air Canada Running Out Of Time To Avoid Strike By Flight Attendants

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MONTREAL - The union representing Air Canada's flight attendants presented a new contract proposal to management on Saturday, saying the airline's position at the bargaining table continued to be "unacceptable."

The Canadian Union of Public Employees was waiting for management's response to the proposal, it was unclear if there would be further negotiations on Sunday.

The union has set a strike deadline for Wednesday morning after giving strike notice on Friday.

Negotiators for the two sides have been meeting since Sept. 1 trying to hammer out a second contract that can win member approval.

Flight attendants overwhelmingly voted to give their union a strike mandate, less than a month after they rejected a previous tentative agreement.

Hanging over the heads of the two sides is believed to be a government threat to quickly order an end to a strike that could threaten the country's weakened economic recovery.

Federal Labour Minister Lisa Raitt has invited both sides to a meeting if they can't hammer out a deal this weekend.

"If there is no progress after this weekend, I intend on meeting with both parties face-to-face Monday in Ottawa," Raitt said in an email.

"I had a conference call with parties Wednesday evening. My message was that we want them to get a deal that can be ratified by membership. And if they can't get a deal then I asked them to find a process to get them to a deal.

"Both parties understand the effect that a work stoppage has on the economy and will work hard to get a deal."

A three-day strike in June by Air Canada (TSX:AC.B) customer service agents ended after they reached a deal once the government tabled back-to-work legislation.

The precedent created by the government appears to have reduced the anxiety of some passengers planning last-minute trips next week.

Rivals such as WestJet Airlines (TSX:WJA) and Porter Airlines say they have not seen any substantial increase in bookings as Air Canada customers seek alternative transportation.

"We do have the ability to add some capacity (extra flights) if it becomes necessary... but so far, we haven't seen any increase in calls or bookings as a result of this situation," said Robert Palmer, spokesman for the Calgary-based airline.

Brad Cicero of Porter Airlines added that there is "currently no change in the booking pattern."

Business passengers have greater flexibility to change flights if there is a strike. But leisure travellers with firm bookings in the coming days may be concerned about plans being disrupted, said Robert Kokonis, president of airline consulting firm AirTrav Inc

"I think Sunday is when a lot of people are going to start to get really nervous," he said in an interview from Toronto.

Kokonis believes the chances are strong that flight attendants will strike next week.

"Although it may be short, I have a strong feeling that they're going to want to stick it to the company even if it's only for a couple of days."

He said an internal memo from Susan Welscheid, Air Canada’s senior vice-president of customer service, fanned the flames of discontent by minimizing the concessions made by flight attendants during the company's 2003 restructuring and pension payment holiday a couple of years ago.

Welscheid urged flight attendants to buck up and accept the unpredictable nature of their jobs.

"This departure from the routine is what makes the role attractive, and why we receive, on average, 25 applicants for every cabin crew member we hire," said the six-page memo obtained by The Globe and Mail.

She said Air Canada's flight attendants enjoy work rules that are "superior" to North American rivals and receive among the highest salaries on the continent.

A cabin crew member aged 55 with 30 years of service, receives $51,500 in salary plus $27,880 in various benefits and pension contributions

But Kokonis said the tone of the memo was wrong and will confirm the union members' willingness to strike.

"The combination of that type of rhetoric, some concern about the low cost airline proposition, jointly together I think they'd be prepared to go to the limit."

Industry observers believe a strike by 6,800 flight attendants would have a far more serious impact than June's three-day strike, even though the airline has reportedly trained managers as replacements.

Air Canada has yet to disclose its contingency plans in the event of a strike, but has said it would operate a partial schedule with the help of its codeshare partners.

Members of the Star Alliance, including United Airlines, Continental and Lufthansa, will continue to operate flights linked with Air Canada. They may even be called upon to increase their capacity to replace Air Canada flights, if can accommodate.

But the airline won't be able to maintain service to its vast international network, analysts say.

Jazz will continue to operate regional connector service for Air Canada since its flight attendants operate under a separate contract.

But spokesman Manon Stuart couldn't say if the independent airline owned by Chorus Aviation (TSX:CHR.B) will be called upon to increase the frequency of flights or alter its routes to accommodate disruptions at the mainline carrier.

"Air Canada makes all the commercial decisions regarding the Air Canada Express operations and that includes any scheduled flights or changes," she said.

Spokesman Isabelle Arthur declined to detail Air Canada's plans.

"We will provide further updates as developments warrant," she said in an email.

Flight attendants have been down this road before, taking negotiations to the edge in 1999 before winning sizable wage increases.

Prior to June's strike, Air Canada pilots walked off the job in September 1998 which cost the carrier $250 million.

"I cannot think of many companies or industries that would take a hit like that in 14 days," former Air Canada CEO Robert Milton wrote in his memoirs.

A potential strike comes as the carrier is attempting to produce sustainable profits in a very low-margin business. The recent quarterly results were fairly strong, but volatile fuel prices and macroeconomic conditions cloud its future prospects.

Air Canada and its regional partners carry about 31 million passengers annually to more than 170 destinations on five continents.

On the Toronto Stock Exchange, its shares hit a 52-week low on Friday before closing up five cents, or 3.2 per cent, to $1.62.