Air Canada has won some breathing room from one of its key credit card processors, the cash-strapped airline said Monday.

Shares of Canada's largest airline bounced higher after it said it had reached an agreement with one of the companies that processes customers' credit card transactions, allowing Air Canada to reduce the level of cash it needs to have on hand to satisfy the card firm.

The agreement reduces the level of unrestricted cash that Air Canada is required to hold to CAD$800 million (USD$648 million) from CAD$1.3 billion before.

"It is good news for Air Canada. But there are a lot of other issues that the company has to deal with," said Research Capital analyst Jacques Kavafian.

"It gives them more breathing room before they violate the covenant. Having more cash is always good," Kavafian said.

Air Canada chief executive Calin Rovinescu said in Monday's statement that the airline is in talks with several potential lenders about additional financing.

He said the lenders are likely to require labor stability "as a condition" before they will advance any money.

Air Canada is headed into a period of intense negotiations this summer with unionized employees, with four contracts expiring by July.

Talks between the airline and the Canadian Auto Workers, which represents 4,500 sales and service agents, started last week.

Air Canada had warned earlier this month that unless it was able to revise the terms of its credit card arrangement, its cash could be substantially reduced over the next year.

The deal depends on a formal agreement being reached by June 15.