Leadership Letter to Local 2002 Air Canada Members, April 2, 2003

Open Letter to all CAW Local 2002 Members
At Air Canada, Mainline and Jazz

Tuesday April 1, 2003

Dear Brothers and Sisters;

Like yourselves, we were disappointed at the news today that Air Canada has decided to file for bankruptcy protection, under the Corporations and Creditors Arrangements Act (CCAA).

It is not clear to us why Air Canada took this action at this particular time. Only days earlier, your elected bargaining committee had reached an agreement with Air Canada that would allow for the temporary layoff of over 1000 CAW members at the company, who would then receive supplementary unemployment benefits totalling 75% of their take-home pay. This agreement, together with our agreement to postpone the 2.5% wage increase which was due March 31, will save the company $40-45 million this year alone. We were prepared to discuss further cost saving measures with the company. We understand that negotiations were underway with the other unions represented at Air Canada, as well. The company still has significant cash reserves, so its day-to-day ability to pay its bills was not in doubt.

Despite this, the company took the unilateral decision to seek bankruptcy protection in the court, and that protection has been granted.

What does this filing mean to CAW members at Air Canada and Jazz? Air Canada will continue operating on a business-as-usual basis. You will continue working, and you will be paid normally for your efforts. Air Canada will use the shield provided by the CCAA to open negotiations with banks, bond-holders, and aircraft leasing companies regarding the company's huge debts. The CAW will insist that the federal government play a role in this process. Hopefully this process will allow Air Canada to write off a large share of its debt, reduce its interest costs and aircraft lease payments, and climb out from its current financial predicament. Once the company has developed a viable debt restructuring plan, then the court protection will be lifted and the company will start off again with a new financial lease on life.

The CCAA filing does not mean that Air Canada can unilaterally rewrite its collective agreements with the CAW or any other union. However, we are clearly in uncharted waters, both legally and politically, and must act intelligently to ensure our members' and retirees' long-term interests in a viable national airline are protected. Where there are changes that can be made that will assist in putting Air Canada back on its feet, without unfairly disadvantaging our members, your elected bargaining committee will support them. Our recent agreement regarding the temporary layoff of over 1000 CAW-represented employees allows the company to downsize operations in line with current depressed traffic levels, but in a manner which doesn't impose undue hardship on CAW members. It makes good sense for your union to participate in initiatives like this one, designing and leading change where it can occur fairly - rather than simply trying to forestall an inevitable day of reckoning.

Rest assured, however, that the CAW will not agree to wage cuts. We know from bitter past experience that wage rollbacks never solve a company's financial problems. The problems facing Air Canada, and the whole airline industry, are not the result of labour costs. Nevertheless, those problems are real, and CAW must work to find a way to ensure the long-term viability of Air Canada while minimizing the impact on our members and their families.

One especially worrisome aspect of the CCAA filing was Air Canada's intention to attack pension benefits, including benefit reductions, freezing the accrual of benefits for a certain period of time, or even converting the entire pension plan to a defined benefit RRSP-style pension plan. This is an incredible insult to the contributions of Air Canada's employees, past and present, to this company over its lifetime. How incredibly unfair it would be to attempt to reach into the pockets of Air Canada retirees, to bail out the company's current management. It goes without saying that we will challenge this assault on our most basic workplace rights in every manner that we can: legally, politically, and at the bargaining table. The CAW will never accept our members' pensions being reduced or undermined by Air Canada management.

We have demonstrated our recognition of the changes affecting the airline industry, and have been flexible in our dealings with Air Canada during this crisis, as evidenced by our unique agreement on workforce reductions. We are prepared to continue bargaining on your behalf with the company to attain further cost reductions where possible without harming our members and their families. But Air Canada cannot take our good will and flexibility for granted. If the attitude reflected in this attack on our retirement incomes continues by Air Canada management, then we are headed for a major confrontation - one in which we will call on, and count on, the support and solidarity of every single CAW member at Air Canada.

Another challenge facing us is management's stated intention to break up parts of the company into separate business units, and then sell them off to outside investors. It is not at all clear to us that this strategy will do anything more than generate some short-term cash resources, without addressing the deeper and longer-run problems facing Air Canada. At any rate, we will bargain protections for CAW members to ensure that their status as full members of the Air Canada family is maintained, and that their wages, benefits and job security are not threatened. This will be especially important for CAW members working in Jazz, Aeroplan, ground handling, and other potential spin-offs.

In some cases, CCAA protection can turn out to be a very positive process for troubled companies. For example, there are about 800 CAW members who work for AT&T Canada, the financially troubled long-distance carrier. The company went through a CCAA restructuring, wrote off most of its debt, and has emerged with a much better chance for financial survival. Our collective agreement was not changed through this process, and CAW members continue to enjoy the same wages and benefits as they did before the CCAA was invoked. So while this is an incredibly worrisome and challenging time for all CAW members at Air Canada and Jazz, we are confident that if we work together in solidarity we can protect the long-term interests of our members and retirees.

We would like to thank all CAW members at Air Canada and Jazz for the confidence they have expressed in their elected bargaining committees and workplace representatives. We have proven ourselves, once again, to be the most effective and democratic union in Canada. Your continued confidence in your union, your participation, and your solidarity are essential to our ability to negotiate the uncharted waters ahead of us.

We also want to assure you that the CAW will use its resources and its influence to ensure that Air Canada survives this most difficult moment in its history. Our goal is for Air Canada and its employees, including Jazz, to continue to serve Canadians with a high-quality, safe, and reliable national network. A global country like Canada needs an airline that can link the far-flung communities of our land, and connect us to a rapidly-evolving world, in a way that start-ups like WestJet, with no commitment to building a national network, will never do. We will hold government accountable for its role in contributing to Air Canada's current financial mess. And we will hold Air Canada's management accountable for their inconsistent and arbitrary attitude toward our members.

The next few weeks will be a worrisome and challenging time for us all. Your elected local representatives will work hard to stay in touch with you, to share information, to hear your concerns, and to enlist your support for the tough bargaining that lies ahead. The CAW has a well-deserved reputation for making the most out of bad situations: for winning victories even when the situation seems to be impossible, for acting prudently to secure the long-term job security of our members, for wielding our collective power in an effective and democratic way. Together we can do that again, as we work to traverse the financial challenges facing Air Canada.

In solidarity,

Buzz Hargrove, CAW National President
Anne Davidson, President, CAW Local 2002
Gary Fane, Director, CAW Transportation Department

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