Air Canada flight attendants back discount airline

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Air Canada has cleared a crucial hurdle in its bid to launch a discount leisure airline, winning the support of the union representing flight attendants.

The Canadian Union of Public Employees told its 6,800 members in an internal memo on Tuesday that "Air Canada mainline jobs will be better protected" with the emergence of the budget carrier, which is poised to compete next winter against tour rivals such as Transat A.T. Inc. and Sunwing Travel Group.

Air Canada is striving to start the new division by early 2012 with four Boeing 767s and six Airbus A319s, with the potential to increase the fleet to 50 planes by 2015 and create hundreds of jobs for flight attendants.

"The union negotiated the right to represent flight attendants at the new low-cost carrier (LCC) Air Canada is proposing," according to the memo signed by three labour leaders at CUPE's Air Canada component and four union local presidents.

The proposed discount carrier will have a lower wage scale and its own seniority list. Protocols have been established to determine seniority rights for flight attendants who might eventually transfer from the discount division to the mainline, an industry official familiar with the tentative agreement said.

CUPE's support for the budget airline proposal is contained in a broader tentative pact signed with management on Monday. Union officials will be recommending acceptance of the five-year labour contract in ratification votes within three weeks.

Air Canada still needs to win approval for the discount division from the Air Canada Pilots Association, whose members rejected a tentative contract in May that would have established a lower wage scale for new hires and current pilots who elect to transfer to the budget carrier to gain more flying hours. ACPA has yet to return to the bargaining table, but it's expected talks will resume by early this fall.

Under CUPE's new labour contract, Air Canada flight attendants are slated to receive wage increases of 2 per cent annually in the first three years and 3 per cent in each of the final two years. The previous pact expired March 31.

A contentious pension dispute between CUPE and management is headed toward an arbitrator chosen by both sides, similar to the process for the Canadian Auto Workers union, which represents customer sales and service agents. The airline wants to put new hires on defined-contribution pension plans, which don't provide a guaranteed level of payout on retirement.

Flight attendants already on defined-benefit pensions will stay on those plans.

But beginning Jan. 1, 2013, "the threshold for an unreduced early retirement pension will be changed from age 55 and 80 points (age and years of pension service) to age 55 and 85 points," CUPE said.

The deal also allows for 250 voluntary severance packages.

Air Canada has experimented with discount carriers in the past, notably the Zip Air Inc. fleet. "The union envisions an arrangement similar to the one that covered the former Zip flight attendants," CUPE said in its memo, referring to "flow-through" provisions that recognize certain rights for those transferring to the mainline.

Zip was launched in 2002, primarily as a low-cost rival to WestJet Airlines Ltd. Just two years after startup, Air Canada closed Zip, which had 12 Boeing 737s for short- and medium-haul domestic routes.

With the blessing of unions, Zip pilots and flight attendants received lower wages than their mainline counterparts.