Seniority List Squabble Delays Deliveries

The on-again, off-again Air Canada deal for some $6 billion worth of Boeing jets -- up to 32 new 777 and 787 Dreamliner aircraft -- is on again.

Canadian labor arbitrator Martin Teplitsky upheld a labor contract between the airline and its pilots that the pilots had previously rejected, making the purchase of new jets impossible. This forced cancellation of the deal in June.

The arbitration, completed November 1st, was binding upon both parties. Now the Montreal-based airline is clear to resume negotiations for deliveries of up to 18 777s and 14 787s (below) that the airline wants for new international routes that are a central part of its strategy.

The pilots reportedly did not reject the contract because of any objection to the international routes or new, fuel-efficient Boeing jets. Instead, the rejection vote was a way for the rank and file members of the Air Canada Pilots' Association to express their dissatisfaction with the merged seniority list that resulted from the 2000 Air Canada/Canadian Airlines merger. The majority of pilots who were with Air Canada before the merger believe that the contract is biased in favor of former Canadian Airlines crewmembers.

Air Canada bought Canadian, which was teetering on the brink of collapse, in 2000. The events of 2001 made it harder for Air Canada to digest its former competitor, and pushed the merged carrier itself into reorganization, the Canadian equivalent of Chapter 11 bankruptcy.

Air Canada remained in reorganization until little over a year ago, and remains far from financial health.

Air Canada has lost more than just the time spent resolving the dispute. Between the June cancellation and the November reinstatement, other eager buyers snapped up all of the Canadian line's 2006 delivery slots. Boeing and Air Canada are now aiming for 2007 for the earliest deliveries of the new jets.

As many as three 777s could be delivered in 2007, with the first 787 Dreamliner coming no sooner than 2010.

A statement from Air Canada president Montie Brewer said that "[W]e can now re-engage Boeing ... on the acquisition of new wide-body aircraft and move forward with plans for the airline's future."

Under the new contract, 777 captains would earn up to $238.93 ($Canadian) and 787 captains $213.02 ($C) an hour, for a typical 80 hour month. Teplitsky ruled that the agreement was "made in good faith by experienced negotiators," according to the Toronto Globe and Mail.

"We are pleased with Mr. Teplitsky's decision, which provides us with the certainty required on pilot costs," the paper quoted Brewer as saying.

While arbitrator Martin Teplitsky has ruled on the validity of the labor contract, the thorny underlying dispute on pilot seniority remains on his desk. There were no indications of when a ruling may be expected.

Boeing may have welcomed the news, but the markets didn't. Boeing stock closed down 35 cents on the New York Stock Exchange, and continued down in after-hours trading.

Eh.

FMI: www.aircanada.ca, www.boeing.com