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Air Canada customer service agents picket at Pierre Elliott Trudeau airport in Montreal Tuesday, June 14, 2011 after walking off the job following failed negotiations between union's and management on pension reform issues.Graham Hughes/The Canadian Press

The Harper government is threatening to legislate an end to the Air Canada strike if union negotiators and airline management can't reach a deal.

Ottawa is also encouraging both sides to send their dispute over pensions to an arbitrator.

The government is preparing to introduce a back-to-work bill as soon as Thursday. But it could take until middle of next week before such legislation passes into law and spells relief for passengers.

"We are concerned by the effect that this strike will have on our economic recovery, which is still fragile, and on Canadians in general," Labour Minister Lisa Raitt said Tuesday.

About 3,200 airport customer-service agents and 600 call-centre staff went on strike at 11:59 p.m. Monday. The Canadian Auto Workers union is warning that Air Canada wants to slash payouts to new retirees in defined-benefit plans and weaken pensions for new hires by forcing them to join less-attractive, defined-contribution plans.

Ms. Raitt said her threat to end the strike is not meant to benefit one side in the disagreement.

She cautioned that Air Canada and the union should realize her solution might not be the one each had preferred.

Ottawa could send the dispute to arbitration as part of the back-to-work bill, she noted. That would give her the power to pick the judge who arbitrates it.

"Nobody knows what the content of the legislation is - and right now both parties should be wondering whether or not they would do better making their own deal at the table," Ms. Raitt told The Globe and Mail.

The Labour Minister urged Air Canada and the union to reach a settlement by themselves, suggesting they send their dispute over pension changes to arbitration as part of the deal.

"If Air Canada management and the union are at such a point where they know that they have a big-ticket item on the table that they're having a struggle to deal with in a short period of time - and presumably it's the pension issue - they can voluntarily send this to an arbitrator of their own choice," she said.

She said this would have been preferable to letting talks deteriorate and a strike ensue. "Why would they inflict this kind of economic issue on the Canadian public?"

The Labour Minister defended threatening to intervene so quickly, saying Air Canada's service would be increasingly affected by the strike as the days went by.

Things might be running smoothly right now, Ms. Raitt said, but "there is a period of time when critical mass hits and you're going to have more and more cancellations and delays and crowding at airports."

The Conservative government served notice of back-to-work legislation on the Commons order paper Tuesday evening. It has to wait 48 hours before introducing a bill under Parliamentary rules.

Finance Minister Jim Flaherty, speaking Tuesday afternoon, urged an end to the strike, saying it could have significant impact on the economy.

But CAW national president Ken Lewenza said Ottawa is stepping in too soon. "It's shocking interference," he said. "The airline is saying it's business as usual, but the government will be introducing legislation to end the strike. It's frustrating."

Air Canada said it has contingency plans in place to maintain its flight schedule, aided by 1,700 managers and non-union staff at nine major Canadian airports.

"While negotiations of this nature are inherently challenging, we would prefer that a negotiated contract to the benefit of both parties could be achieved through the normal bargaining process," Air Canada chief operating officer Duncan Dee said.

During the strike, Air Canada is recommending that passengers obtain boarding passes online, show up early at the airport and avoid checking in bags at the counter, if possible, to help cope with long lineups.

Kayla Mudde, 28, appeared three hours early at Toronto's Pearson airport for her Air Canada flight to Calgary on Tuesday afternoon. She sped through the check-in process, even with two bags. "I was a bit worried," said the social worker from Alberta.