MONTREAL - Air Canada's (TSX:AC.B) shares got a lift Tuesday after the financially strapped airline reached tentative deals providing a 21-month moratorium on pension contributions with three unions.
The Montreal-based airline's shares gained nearly 13.5 per cent in trading, gaining 19 cents to $1.60 on the Toronto Stock Exchange.
Investors were responding to an overnight announcement that deals had been reached with three of Air Canada's five unions, moves that will save the airline millions of dollars in costs as it tries to deal with a cash crunch during the current recession.
Talks are continuing with unions representing pilots and flight attendants.
The agreement achieved with machinists, service agents, dispatchers and retirees provides the airline with labour peace and would save it millions of dollars in annual pension contributions for past service.
In exchange, workers will obtain an unknown equity stake in the airline to mitigate the risk of them agreeing to defer pension contributions.
Air Canada parent company ACE Aviation Holdings (TSX:ACE.B) would also become involved in financing the airline.
Leslie Dias, local president of the Canadian Auto Workers' Union which represents 4,500 service agents, said the tentative contract agreement will provide security for members while helping the airline to avoid another court filing for bankruptcy protection.
Ratification votes are expected next week. The union's first attempt to ratify a tentative contract agreement failed earlier this year.
Airline analyst Jacques Kavafian of Research Capital Corp. said labour agreements with all employees, while positive, would be only one part of the effort needed to ensure Air Canada's survival.
He said the airline must still raise financing and reduce its operating costs.
