Air Canada union gears up for new talks on Friday

By Susan Taylor

OTTAWA, July 2 (Reuters) - Negotiators for Air Canada's (ACa.TO: Quote, Profile, Research) biggest bargaining unit are meeting in Toronto on Thursday to review their options before holding talks with the cash-strapped airline on Friday to try to forge a contract that union members will accept.

A slim majority of the technical, maintenance, and operational services workers at Air Canada -- members of the International Association of Machinists and Aerospace Workers -- voted against a tentative 21-month deal that would have frozen wages and pension funding.

That rejection, by a narrow 50.8 percent, could jeopardize the airline's plans to gain federal approval for a temporary freeze on pension funding and win C$600 million ($517 million) in loans.

Analysts say that fresh financing and a pension funding respite are critical to help the debt-laden airline avoid a second bankruptcy filing in six years.

Air Canada has been hard hit by a sharp decline in global travel due to the recession, as well as by tough domestic competition.

A group of 22 bargaining staff with the union is meeting in Toronto on Thursday to determine how best to proceed, an IAMAW spokesman said.

"We've got to go back to the table and see if we can get a deal that everybody can live with," said the union's communications director, Bill Trbovich.

"We're trying to explain to our people that this is very serious: if you want the company to stay out of (bankruptcy) then it has to be this agreement."