The head of the Canada Auto Workers union, embroiled in labor negotiations with Air Canada, said Sunday he was not optimistic that both parties could reach a deal this weekend.

"At this point today, I am not very optimistic. We have another meeting at 4 p.m. (EDT), and if that brings a different mood who knows," Buzz Hargrove, president of the Canada Auto Workers Union said.

Canada's largest airline reached tentative agreements with five of its seven labor unions over the weekend to shave costs, boosting the troubled airline's chances to strike a deal with a key financial backer as it seeks to emerge from bankruptcy protection.

Air Canada needs to save CAD$200 million (USD$143.8 million) a year in labor costs to get the financial backing of Deutsche Bank, which has promised to underwrite a CAD$850 million (USD$611.3 million) equity offering for the insolvent airline.

It still has to get agreement from the CAW, representing ticketing and sales reservation agents, and the Canadian Union of Public Employees (CUPE), representing about 6,500 flight attendants.

Deutsche Bank had set a May 15 deadline for Air Canada to get its unions to agree to the cost-cutting measures.

An Air Canada spokesman declined to comment if the deadline had been extended but said that negotiations were continuing.

"We're taking the whole deadline thing seriously," Hargrove said. "We have spent two nights without sleep trying to find a solution here and it still escapes us."

Air Canada reached an agreement with its largest union, the International Association of Machinists and Aerospace Workers, which represents about 14,500 of its 33,500 employees.

Hargrove said that his 7,500 active CAW members are expected to cut about CAD$50 million (USD$40 million) in costs, whereas the machinists' union, with nearly twice as many members, has to cut costs by CAD$40 million (USD$28.8 million).

"There are so many differences," he said, before heading into another round of negotiations. A cut for his members would mean reduction in pay of about CAD$10,000 to CAD$11,000 per employee. The sales and reservation agents make between CAD$35,000 to CAD$49,0000 a year in salary, he said.

"We're trying to find a way to satisfy the concerns that the company has and at the same time protect the standard of living of our members," Hargrove said.

A spokeswoman for CUPE said that she was "hopeful" her union would be able to reach an agreement with Air Canada soon. CUPE has to cut costs by CAD$65 million (USD$46.7 million).

Air Canada filed for protection from creditors in April 2003 but hopes to emerge as a reorganized airline by the end of September if the Deutsche Bank plan succeeds.

The CAD$200 million (USD$143.8 million) in cost savings is part of a bigger plan for the airline to cut CAD$1.1 billion (USD$791 million) a year in labor expenses. Until now, the airline has reached deals to cut costs by about CAD$900 million (USD$647 million) a year; however, to reach an agreement with Deutsche Bank, Air Canada needs another CAD$200 million in savings.

(Reuters)