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Labour Minister Lisa Raitt (Sean Kilpatrick)
Labour Minister Lisa Raitt (Sean Kilpatrick)

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Another take on Air Canada: It's the government's fault Add to ...

These are stories Report on Business is following Friday, March 23, 2012. Get the top business stories through the day on BlackBerry or iPhone by bookmarking our mobile-friendly webpage.

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Walkout delays Air Canada George Smith has an interesting take on today's wildcat strikes against Air Canada .

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And whether you agree with him or not, it's a debate worth having.

Mr. Smith was at one time director of employee relations at Canada's biggest airline, sitting across from various unions in negotiations. Now he's a fellow at the Queen's University School of Policy Studies.

To recap, as The Globe and Mail's Brent Jang reports, a walkout by ground crew that began last night in Toronto, and then spread to Montreal, forced Air Canada to delay or cancel dozens of North American flights. Air Canada has since won an injunction forcing an end to what the airline described as illegal walkouts.

My colleague has the story of why and how it happened, and it's up to the travelling public to decide whether the union members were right or wrong. But it's worth looking at the broader issue of how Labour Minister Lisa Raitt took away the right to strike by Air Canada employees over the past several weeks.

As Mr. Smith sees it, Ms. Raitt left the workers with few options. The answer - and remember he was on the management side of the table - is to take the "short -term pain" of a strike but get longer-term labour stability in return.

"Friday's wildcat strike and last weekend's job action by pilots has created a scenario for Air Canada and passengers that is worse than a one- or two-week strike - uncertainty," said Mr. Smith.

"At any time over the next few weeks or months, planes maybe delayed or cancelled without notice because of disgruntled union employees who no longer have the legal right to strike. This has the potential to financially harm Air Canada as passengers book with Westjet and Porter to ensure they get to their destinations. The best way to prevent future disruptions is for the federal government to step aside and not interfere in the collective bargaining process of Air Canada management and union leaders."

Pengrowth, NAL in deal A marriage today of two players in Canada's oil patch in a deal worth some $1.3-billion.

Pengrowth Energy Corp. has struck a deal for NAL Energy Corp. that it says values the company at about $1.9-billion, though that includes debt.

NAL shareholders will get 0.86 of a Pengrowth share, which the companies said is equivalent to $8.56 a share based on Pengrowth's closing price yesterday.

"The addition of the NAL assets will enhance our cash flow base and further augment our robust light oil drilling inventory," said Pengrowth chief executive officer Derek Evans.

The combined company would have production of more than 100,000 barrels a day of oil equivalent, and 434 million of proven and probable reserves.

Second verse, same as the first You can't calm investors for very long where the euro zone's concerned.

No matter what its leaders attempt, and they have made mighty efforts, if somewhat late, borrowing costs in the embattled countries of the 17-member monetary union continue to run high.

The focus today is on Spain, and Italy to a lesser extent, but bond yields remain elevated in Greece even in the wake of the debt swap.

Yields on Spain's 10-year bonds were just shy of 5.5 per cent today, having run below the 5-per-cent mark earlier.

"Yesterday’s disappointing economic data from France and Germany saw concerns about growth in Europe push back near to the top of the agenda as 10-year bond yields in Italy and Spain started to edge back higher again, above the 5-per-cent level, bringing the recent rise in equity markets to a shuddering halt," said senior market analyst Michael Hewson of CMC Markets.

"This has raised concerns that the recent good run in equity markets could be over and we could be heading back down again," he said in a research note.

"With Belgium, the Netherlands, Italy, Portugal, Greece and now Ireland in recession, concerns about the ability of Europe to prevent a contagion effect are beginning to resonate once more in Brussels, ahead of next week’s European finance ministers meeting in Copenhagen."

Yields on Greek bonds that mature in 2023 are above 20 per cent, according to Bloomberg. Earlier this month, bondholders agreed to shave billions from Greece's debt via a swap, in what was known as the private sector involvement, or PSI, that was part of a grander fiscal plan and paved the way for more bailout money.

Observers, though, still believe Athens will require yet another rescue.

"The new Greek bonds are trading at extremely elevated yields, suggesting that investors don't believe the PSI deal was the last debt restructuring we've seen for Greece," said Megan Greene, head of European economics at Roubini Global Economics.

Inflation speeds up Energy costs continue to push up the pace of inflation in Canada.

And it's not just at the gas pump, but also electricity, Statistics Canada said today.

On a seasonally-adjusted monthly basis, consumer prices rose just 0.1 per cent in February, though the rise was 0.4 per cent when not adjusted. On an annual basis, the inflation rate inched up to 2.6 per cent, slightly faster than January's 2.5-per-cent pace, the federal agency said.

Pump prices climbed 8.9 per cent on the year, and electricity costs 8.7 per cent. Energy prices overall rose 7.2 per cent, again a faster clip than January's 6.5 per cent.

The cost of food also climbed, by 4.1 per cent, largely because of a 7.1-per-cent hike in meat prices and 7.2-per-cent increase in bread.

The so-called core rate of inflation, which strips out volatile price measures and helps guide the Bank of Canada's monetary policy, also inched up on an annual basis, to 2.3 per cent from 2.1 per cent.

While inflation is running above the central bank's target, it's not going to sway Governor Mark Carney and his colleagues.

"While the elevated core rate (fastest pace since 2008) may have come as a surprise to some in markets, the Bank of Canada will likely look through today’s reading, as the annual pace was boosted by base year effects (a weaker index level last February)," said Emanuella Enenajor of CIBC World Markets.

"As those effects fade in March, core inflation could ease back to the centre point of the bank’s range."

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