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Labour Minister Lisa Raitt urged Air Canada and its 3,000 pilots to keep working toward a contract agreement, offering them a new mediator on Tuesday for up to six more months of negotiations.
The offer from Raitt, who stepped in last year to stop other labour disputes at the country's largest airline, came as a "cooling off" period in the contract dispute expired, but neither side signaled that it would break off talks.
"The minister believes the parties need more time," ministerial spokeswoman Ashley Kelahear said, noting that neither side had yet taken up the mediation offer.
Accepting the offer would not preclude a strike or lockout, she told Reuters.
Raitt repeated later in the day that a work disruption at Air Canada could harm the country's economy, a justification she gave last year for the government halting two labour disruptions at Air Canada.
"Our government believes that a work stoppage at Air Canada is contrary to the best interests of hardworking Canadians, Canadian companies and, already, to the fragile economy," Raitt said in the House of Commons.
She added that the best solution was one "the parties find for themselves".
The Air Canada Pilots Association (ACPA) tentatively welcomed the minister's offer of a new mediator, which its executive council will discuss at a meeting in Vancouver on Tuesday.
"It seems to me the minister appreciates the complexity of the issues that we are dealing with and that it will require a good deal of time to sort these things out," ACPA President Paul Strachan told Reuters.
Air Canada is now legally entitled to file 72 hours notice of its intention to impose a lockout but said on Monday it had no plans to do so. It said talks would extend beyond the end of the cooling-off period.
The union is waiting for the results from a vote by its members on whether to back a strike. If they support a work stoppage, the union could file 72-hour notice of its intention to strike. The results are expected on Tuesday evening.
The ACPA's chief worry in the talks is that Air Canada plans to outsource "good Canadian jobs", Strachan said.
A leaked internal memo earlier this month showed that pilots are concerned that Air Canada wants to set up a planned low-cost carrier offshore, where it would be able to tap cheaper labour than at home. The subsidiary is expected to be modelled on Qantas's low-cost offshoot, Jetstar.
The pilots' collective agreement expired March 31, 2011. They voted down a tentative agreement in May, partly because of concerns about the impact on jobs and wages of a low-cost carrier.
Air Canada faced a year of labour unrest in 2011. Call center and customer service staff staged a three-day walkout in June, and a strike by flight attendants was barely averted in October. The Conservative government, which argues the airline is important to the country's economy, stepped in to end both disputes.
Air Canada has now reached new contract agreements with all its major unions except for the pilots. In a sudden burst over the weekend, it reached three tentative deals in three days.
Shares of Air Canada were unchanged at C$1.04 on Tuesday afternoon on the Toronto Stock Exchange. The stock is down nearly 70 percent in the past year, partly on concerns about labor disruptions.