Air Canada machinists reject pension deal, union says

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(Reuters)

TORONTO (Reuters) - Members of Air Canada's largest union rejected the carrier's plan to suspend pension funding for nearly two years, complicating the cash-strapped airline's efforts to steady its finances, a newspaper reported on Tuesday.

A slim majority of mechanics, baggage handlers, cargo agents and electricians narrowly voted against a proposed 21-month agreement that would have frozen their wages and put a moratorium on pension funding, the Globe and Mail said on its website.

Bill Trbovich, a spokesman for the International Association of Machinists and Aerospace Workers, told the newspaper that 50.8 percent of the members voted against a tentative pact that labor leaders had urged the rank and file to accept.

Trbovich said the vote threatens to delay efforts by Air Canada, a unit of ACE Aviation Holdings Inc , to gain federal approval for a 21-month deferral of its pension plan.

A suspension of payments is necessary for the airline to avoid filing bankruptcy protection for a second time in six years, analysts say.

Air Canada has said that labor peace is crucial if it hopes to line up fresh financing to make its debt payments while riding out a sharp global slowdown in travel.

Earlier this month, the airline reached a tentative agreement with flight attendants, the last of its big unions to accept the moratorium on funding a C$2.9 billion shortfall in its pension plan.

The vote on Tuesday could embolden members of other unions to reject agreements negotiated by their leaders.

(Reporting by Frank McGurty, editing by Jackie Frank)