quote:

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Air Canada, CAW reach last-minute deal

Airline, union reach `bittersweet' agreement on cost cuts

`A lot of people in Canada are going to be very relieved'

RICK WESTHEAD
BUSINESS REPORTER

Air Canada has hammered out an 11th hour agreement on pay cuts with the union representing its reservation agents, ending a week-long stalemate during which the insolvent airline flirted with liquidation.

Canadian Auto Workers president Buzz Hargrove said the union, which represents 6,400 Air Canada employees, would meet the airline's demand for $165 million in total concessions from his union.

Air Canada chief executive Robert Milton called the agreement "bittersweet."

Ontario Superior Court Justice Warren Winkler, who supervised the talks, said "hopefully a lot of people in Canada are going to be very relieved.

"This was the cliff hanger because without this one, the whole deck of cards would have fallen down," he said.

Hargrove said the union withstood Air Canada demands that they agree to $45 million worth of new cuts, which the airline said were necessary because the full amount of last year's reductions never materialized.

The union has said they were willing only to concede $18.3 million.

Hargrove said both sides gave ground, but he wouldn't elaborate.

"Bargaining is about compromise," Hargrove said. "There was a number of compromises made in every area."

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Imagine that each worker ponied up enough to make up their portion of the needed billion dollars to make the business solvent.

There are approximatley 33,000 workers. Divide that billion by that amount and you get $30,300.00
on a per head basis - a three quarters of a year's salary! That is a lot of money.

It also owes $12 Billion dollars! Huge numbers or the equivalent of $360,000.00 per worker! The worker to finance this amount on a 25 year mortgage would need to pay 3600/mo (43K per year), that is, double the average current wage.

But then again what if they could finance it over say 75 years? The cost to the worker would then be a mere $15K a year. Over a hundred years a mere $10K/year that is LESS than the concessions now being demanded.

Do the math. Management is asking for $42 million EACH year. Divide this by the payroll and as Hargrove points out, that's 11K per worker. Wouldn't it be better if the worker's got a piece of the action for this "investment"? I mean it would be wildly impractical for many reasons but if the union dues were increased by an amount equivalent to the cost of financing the 11K over even a one year term in return for shares in the corporation wouldn't that be a better deal?

That cost would be a measely 100 dollars a month for 25 years...but wait!

This 42 million is a wage reduction, that is a 42 million dollar saving every year from now until the far distant future. Do the numbers on this amount. $42 million a year is the equivalent of a mortgage payment of on an astronomical amount.

Remember the initial numbers on the 12 Billion dollar debt? It cost each worker 42 thousand a year. This concession is roughly a 1/36th as much. My math is still wonky but you are getting the idea...

Assume as at a rough calculation that every $100,0000 of debt cost $12000 a year. $42,000,000/12,000 times 100,000 = $350,000,000.

This is assuming your basic mortgage rate of 7%. Now supposing governments lent the CAW $350 million at 2% then the math looks a lot different.

About half of the cost is interest. Cut interest payments by two thirds and you need to borrow only $300,000,000 and the union only needs to take a $35 million dollar hit and so on...

But why shouldn't we start buying back Air Canada for the Canadian national community and have it run by a labour collective? Why not do it over a 100 years?

[ 23 May 2004: Message edited by: Boinker ]

[ 24 May 2004: Message edited by: Boinker ]