10/11/2011 04:00 EDT | Updated 12/10/2011 05:12 EST

Air Canada Strike: Flight Attendants Poised To Walk Off Job Early Thursday


MONTREAL - The federal government is moving to prevent a strike Thursday by Air Canada flight attendants by sending the matter to the Canada Industrial Relations Board for review.

Labour Minister Lisa Raitt told CTV News that a reference will be sent to the board Wednesday asking it to examine the difficulties in winning ratification of two tentative agreements reached by company and union negotiators.

"While the matter is before the CIRB, there cannot be a work stoppage," Raitt said from Vancouver.

Raitt said the board should not only look at the potential work stoppage and notice of strike issued Sunday, which set the clock ticking towards a legal strike, but the overall way in which the ratification failed.

Air Canada (TSX:AC.B) issued a statement late Tuesday that said it had confirmed Raitt's comments said the airline's representatives would will appear before the CIRB as required.

"Further details are not available at this point. It will remain business as usual at Air Canada and all flights will continue to operate as scheduled," the company said..

The latest twist in Air Canada's troubled contract negotiations comes after members of the union rejected the latest agreement, which was supported by leaders of the Canadian Union of Public Employees.

The tentative deal was reached Sept. 20 with the help of a federal mediator appointed by Raitt and the threat of back-to-work legislation that could have been quickly passed while the House of Commons was sitting.

The reference buys the government time to pass back to work legislation once the House of Commons resumes sitting on Monday.

Members of Parliament could have been recalled to pass any back-to-work legislation. But House rules would have prevented any law from being passed until after the start of the threatened strike early Thursday.

Earlier Tuesday afternoon, the union announced that its negotiators were prepared to resume talks and called on Air Canada to address more of the issues that have upset the airline's 6,800 flight attendants over the past decade.

"While no formal talks have taken place yet, we are ready to return to the table and find a way to keep our members and the public flying with a fair collective agreement," said Jeff Taylor, president of the Air Canada Component of the Canadian Union of Public Employees.

"Our members are clearly frustrated, and are demanding their sacrifices over the past 10 years be addressed," Taylor added. "Air Canada must be prepared to more on our key issues."

The union hasn't said publicly which parts of the previous agreement were rejected by the members. CUPE has also declined requests for comment and said it wouldn't make further comments to the media at this time.

Raitt said she's not clear on why flight attendants rejected two agreements given that Taylor had said the latest agreement gave workers 80 per cent of what they wanted.

Flight attendants she's spoken with were all over the place about what they liked and disliked about the two deals.

"It's a bit of a dog's breakfast," she said.

Sources say Air Canada's desire to start a low-cost carrier using lower paid new hires is just one of several issues that likely prompted a second rejection of a tentative deal. Workers fear this model will create a dangerous precedent that could be transferred to the mainline carrier.

Workers also felt increased pay during layovers and a nine per cent overall wage increase over four years wasn't enough compensation for sacrifices made since the airline obtained creditor protection in 2003.

A strike lasting a couple of days would cost the airline about $11.7 million a day in operating revenues and $1.2 million in operating profit, said Robert Kokonis, president of airline consulting firm AirTrav Inc.

Air Canada (TSX:AC.B) said it would operate a partial schedule with the help of company managers, Star Alliance partners and Air Canada Express flights operated by Jazz and Sky Regional Airlines.

While hopeful that a disruption could be avoided, the airline said it continued to "make the necessary preparations to minimize any inconvenience to our customers."

Kokonis said two-thirds of passengers, particularly business travellers and some leisure ticket holders, would rebook flights or make due with the reduced service.

Those most likely to be affected by a strike would be passengers unable to switch carriers or those flying to more remote destinations or where there isn't a lot of competition, he said.

WestJet Airlines (TSX:WJA), which has 35 to 40 per cent share of the Canadian airlines market, announced plans to add extra domestic and transborder flights to accommodate "stranded" Air Canada passengers.

The Calgary-based carrier was playing into passenger fears that could threaten to tarnish Air Canada's reputation, said Kokonis.

Via Rail also announced Tuesday that it would add capacity "as required" if there's a disruption of services at Air Canada.

Weary passengers could switch to alternative airlines longer term, fearful that the flight attendant strike will not be quickly resolved or that future negotiations with pilots and mechanics could break down.

A second contract rejection left the airline questioning the legitimacy of the union's representation. No members of the executive have resigned, but some flight attendants have launched a campaign against the executive.

George Smith, currently a fellow at Queen's University's School of Policy Studies, said the union likely looked at arbitration as its best chance to oppose the airline's efforts to reduce costs and possibly launch a low-cost carrier.

"I think they think that they can do better in arbitration than they can do in negotiations," he said, adding that union members wouldn't lose much pay under that scenario.

Recent arbitration cases involving Air Canada customer service agents and Canada Post workers have required arbitrators to choose either the union's or the employer's position. That leads arbitrators to favour gradualism rather than hand either side a major victory.

For example, the recent arbitration ruling granting the union's proposal for a hybrid pension plan for new customer service hires has prevented Air Canada from achieving its objectives, Smith said in an interview.

Benoit Poirier of Desjardins Capital Markets said a strike by Air Canada flight attendants would be "slightly positive" for Transat (TSX:TRZ.B) since it reduces the potential threat of low-cost carrier despite the threat of government intervention.

Air Canada's discount carrier would compete against Transat and others on transatlantic, Caribbean and Mexican low-cost leisure routes.

On the Toronto Stock Exchange, Air Canada's shares closed down three cents to $1.38 in Tuesday trading.