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RPT-CAW union sees small obstacles to Air Canada pension deal

Monday, 1 Oct 2012 | 5:22 PM ET

(Repeats to widen distribution)

* CAW is only Air Canada union not yet backing pension deal * Says expects government to respond to concerns by Friday OTTAWA, Oct 1 (Reuters) - The most vocal union at Air Canada

registered on Monday only minor concerns about the airline's request for more government relief on pension deficit payments, and indicated it could make a decision in coming days on whether to support the bid.

The Canadian Auto Workers (CAW) Airline Local 2002, which represents 3,800 employees, said it expects Air Canada to respond to its concerns by Friday.

CAW is the only one of the carrier's five unions that has not yet backed the company's request to extend a special pension funding agreement with Ottawa by 10 years to 2024.

The union said it was doing its due diligence and understood the seriousness of the pension shortfall.

"The current deficit - under normal funding requirements - has reached a level that threatens Air Canada's survival," the union said in a statement.

Air Canada's pension deficit stood at C$4.2 billion as of Jan. 1, largely because of extraordinarily low interest rates, and is widely viewed as an existential threat if the company were forced to fund the plan under normal rules.

In 2009, Air Canada won agreement from the government to allow it a moratorium on making any special payments to reduce its defined-benefit pension deficit through 2010, and then a cap on special payments that would rise from C$150 million in 2011 to C$225 million in 2013.

The agreement is due to expire in Jan. 30, 2014, and Air Canada is pressing Ottawa to extend the cap another decade.

Finance Minister Jim Flaherty has said he would only consider granting the extension if the airline had the support of current unionized workers and pensioners - representing 27,000 employees and 25,000 retirees - as well as the country's financial regulator OSFI.

Two of Air Canada's unions supported the request as a condition of their arbitrated settlements and two others have also agreed.

In exchange for CAW's support, the company has offered to extend a deadline for implementation of new pension rules for employees by one year to Jan. 1, 2014.

While the union called this a positive development, it said the new timetable causes problems for employees who had already opted for voluntary retirement in the belief the new rules would come into effect on Jan. 1, 2013. Others who didn't take that option may now consider doing it a year later, he said.

Both groups should be given a chance to change their plans, the union said.

"We have moved quickly but await the company's response to ensure that no one would be harmed by such an undertaking. Air Canada is to respond by Oct. 5, 2012," the CAW said.

($1=$0.98 Canadian)

(Reporting by Louise Egan; Editing by Frank McGurty)

((louise.egan@thomsonreuters.com)(+1 - 613 - 235 - 6745)(Reuters Messaging: louise.egan.reuters.net@reuters.com))

Keywords: CANADA PENSIONS/AIRCANADA