Air Canada's Bail-Out Comes With A Condition

Call Victor Li a knight in shining armor for coming to Air Canada's rescue. Ottawa's flagship airline is bankrupt and Li is negotiating to become its controlling shareholder. But he has a few things he wants assurances on before he signs a check.

First, he wants the airline to order as many as 105 new aircraft by the end of January. Second, he wants the airline and two pilots unions to devise a way to end the bickering on which pilots will fly them. The Air Canada Pilots Association is battling with the Air Line Pilots Association over control of the cockpit.

The dispute arises from the formation of Air Canada's budget subsidiary, Jazz. Last week, the airline said its Jazz pilots would fly the new mid-sized aircraft.

"We haven't had talks with the Jazz pilots about dividing airplanes or any stuff like that because our position is, and remains, that all the (jet) airplanes belong to the main line," said ACPA spokesman Serge Beaulieu.

The dispute won't realistically be settled until Air Canada decides what types of aircraft it will buy with Li's money. The airline is shopping Airbus, Boeing, Bombardier and Embrear. The total layout is expected to top $5.1 billion (Canadian). Li and other creditors have so far kicked in about $1.1 billion of that.

Negotiations between Li and the airline continue as Li demands more cost-cutting concessions. So far, Air Canada has axed about 6,300 jobs. That cut 21% of the airline's wage and benefit costs, but it apparently isn't enough. Bankruptcy documents show Li's company, Trinity, wants the company to save another $220 million a month now and demands more savings by the end of March.

FMI: www.aircanada.ca