Chapter 7 - Money and the Canadian Banking System

Unions set to take stake in Air Canada

http://www.theglobeandmail.com/globe-investor/unions-set-to-take-stake-in-air-canada/article1175555/

Summary:
Air Canada's five unions could acquire a 10-per-cent stake in the airline as management tries to repair its strained labor relations, avoid a strike and preserve cash to survive the recession. Under a tentative deal signed late Monday, three of five unions agreed to accept shares in exchange for supporting the company's proposal to freeze wages and defer most contributions to the employee pension plan for 21 months. The agreement could represent a novel solution to Air Canada's cash problems and, more importantly, help it escape a $225-million pension payment due during the critical summer travel season.

Caisses Populaires and Credit Unions:
Caisses Populaires and Credit Unions were established in order to enable groups of individuals to combine their savings and thus to provide loans to members at relatively low interest rates. These individuals receive their funds by selling shares and accepting deposits from members. The agreement could represent a novel solution to Air Canada's cash problems and, more importantly, help it escape a $225-million pension payment due during the critical summer travel season. If forced to make that contribution, the airline is at risk of falling below the $800-million minimum cash balance it needs to keep payments flowing from a credit card processor.

Reflections:
Air Canada consists of many pilots and flight attendants, the deal’s success now hinges on whether the other two unions, which represent pilots and flight attendants, can be persuaded to sign aboard. By giving equity to some of its 26,000 staff, Air Canada is taking a page from the government-mandated restructurings of General Motors Corp. and Chrysler LLC, in which unionized auto workers accepted an ownership stake in return for giving up wages and benefits. But it may also be an attempt to help blunt a key competitive advantage of rival WestJet Airlines, which uses employee ownership as a marketing tool.