Air Canada Provides Update On Pilot Negotiations

After three weeks of negotiations during which Air Canada was available at all times, the Air Canada Pilots Association (ACPA) has walked away from the table. During this last round of talks, the Company has proposed in excess of $100 million in improvements to the previous offer tabled June 4 and has enhanced offerings on all issues.

``In view of the company's significant movement on all issues in order to achieve a negotiated settlement in the shortest possible timeframe, we are extremely disappointed at ACPA's decision to leave the table at this stage,'' said Calin Rovinescu, Air Canada's Executive Vice-President, Corporate Development & Strategy, who is leading the talks for the airline. ``ACPA's decision to break off talks is regrettable and unjustified in view of the Company's clear resolve to reach agreement. We apologize for the inconvenience to our customers as a result of the prolonged uncertainty. We also apologize to all other Air Canada employees for the ongoing stress and workload impact in dealing with this uncertain situation,'' he added.

ACPA has not given the Company notice of intent to strike. According to Canadian labour law, a union must give 72 hours notice prior to taking any strike action.

Highlights of the company's proposed offer on issues of major concern for pilots included:

JOB SECURITY: Total job security over the life of the collective agreement was proposed for Air Canada's 2,200 pilots. It was further proposed that no pilot would be forcibly relocated from one base to another or forced to work at Air Canada's planned low fare carrier.

FLEET SIZE GUARANTEE: Air Canada had proposed to maintain the current number of aircraft in the fleet as a minimum. The Company's proposal would have moved regional jet flying to the regional carriers in order to enhance feed and network systems to allow Air Canada Regional to become competitive with the rest of the North American regional industry. In exchange for the Company acquiring additional narrow-body jets, the Company proposed to replace the Canadair Regional Jets (CRJs) in the Air Canada fleet with larger jets on a one-for-one basis.

SCOPE PROVISIONS: Principles of job security and balanced growth were proposed between Air Canada mainline operations and its subsidiary affiliates. The scope provisions were intended to provide Air Canada pilots with a partnership in the airline's future growth. Air Canada also proposed giving the pilots approval rights on various codeshare and commercial agreements.

LOW FARE CARRIER PROVISIONS: It was proposed that start-up of the planned low fare carrier and any other potential future specialty carrier (cargo/leisure) would be with pilots on the Air Canada Pilots' System Seniority List. In these discussions, Air Canada further proposed that working conditions and wages for the low fare carrier be modeled around industry precedent for low fare carriers. Air Canada had also proposed a partnership with the Air Canada pilots, involving an equity ownership for pilots of up to 15% of the new low fare carrier.

PENSION ENHANCEMENTS: Air Canada had proposed an increase to basic pension benefits of over $62 million during the life of the contract. Furthermore, the Company proposed a pension plan special security program for pilots to protect contributions in excess of the federally regulated maximum registered pension.

WAGES: A total salary increase of 14.5% over 5,25 years was proposed.

SHARE GRANT: The company had proposed granting 250 shares per pilot, with a total value of $22 million as a one-time recognition for the pilots' contribution in 1999. In addition, significant share appreciation rights would be accrued over the next four years.

WORKING CONDITIONS: The Company had proposed enhancements to working conditions including crewing on long haul flights. All flight duty periods in excess of 15 hours would be crewed with two additional pilots. Air Canada currently has the highest standards on duty day regulations of any airline in the country. In all cases we exceed Transport Canada regulations relating to the issue.

OTHER BENEFITS: In the discussions the Company proposed significant improvements to benefits for pilots under various programs including insurance programs, pay guarantees, vacation credits and other guarantees.

``I fail to understand ACPA's tactic in walking away at this time. Our original proposal was extremely rich and we have improved it by more than $100 million. We listened to ACPA, were responsive to all their concerns and shared with them our strategy for our low fare carrier and our regional connectors,'' said Mr. Rovinescu.

``We proposed to ACPA to participate in key decisions such as codeshare arrangements, creation of specialty airlines, and certain fundamental changes to our structure and operations.''

``We offered total job guarantees for pilots, a first ever fleet guarantee and a massive pension guarantee. We offered an unprecedented ownership piece of the low cost carrier. We proposed major improvements to our long haul crew rules, which already exceed Transport Canada guidelines. ``We believe these to be the most generous and inclusive proposals ever made to Air Canada pilots and we are at a loss to understand how these proposals could be viewed as inadequate or not serious by ACPA,'' concluded Mr. Rovinescu.

In light of ACPA's decision, Air Canada has withdrawn all of the foregoing proposals but remains ready to reformulate a different offer acceptable to both parties on reasonable terms and conditions.