Air Canada seeks government intervention as contract talks with flight attendants stall

By Allison Lampert and Rajesh Kumar Singh

MONTREAL/CHICAGO, Aug 12 (Reuters) - Air Canada AC.TO said on Tuesday it has asked for federal government intervention in contract talks with its flight attendants union, after the airline declared an impasse in the negotiations.

The company also warned of potential flight disruptions, saying it had made arrangements with other Canadian and foreign carriers to provide customers alternative travel options.

Patty Hajdu, Canada's Minister of Jobs and Families, said later in the day that she had met with both the union and Air Canada, and was closely monitoring the situation.

"I ... encourage both parties to remain at the table until a deal is reached," Hajdu said, adding that federal mediators would remain available until an agreement is finalized.

The standoff in contract negotiations have raised the risk of disrupted service as early as Saturday by Air Canada and Air Canada Rouge, which together carry about 130,000 customers a day.

Earlier in the day, the Canadian Union of Public Employees, which represents more than 10,000 flight attendants, rejected the airline's proposal for binding arbitration, arguing it wants a negotiated settlement.

The airline said it had offered a 38% increase in total compensation for flight attendants over four years, with a 25% raise in the first year.

Its offer also addressed the issue of ground pay and improved pensions and benefits, among other advantages.

But the union said the offer would raise actual wages by 17.2% over four years and was "below inflation, below market value, below minimum wage - and still leaves flight attendants unpaid for all hours of work."

Most carriers have paid cabin crew members only when planes are in motion. But in their latest contract negotiations, flight attendants in North America have sought compensation for hours worked, including for tasks like boarding passengers and waiting around the airport before and between flights.

The union said Air Canada had offered to begin compensating flight attendants for some unpaid work but only at 50% of their hourly rate.

Flight attendants could strike as early as August 16, after giving 72 hours notice.

Air Canada said it believed the talks were at an impasse, accusing the union of "insisting on unsustainable wage increases."

POTENTIAL FLIGHT DISRUPTIONS

Canada's labor code empowers the government to direct both parties to binding interest arbitration to avoid massive economic disruptions. There are precedents for government intervention in the transportation sector.

TD Cowen analyst Tom Fitzgerald said the situation would likely prompt the government to intervene.

"We find it hard to fathom that Canada's government would want to sit back and allow this level of disruption to happen to its economy and the traveling public during the peak summer season," Fitzgerald said.