Ottawa OKs Air Canada plan to free up cash

Ottawa has approved Air Canada's proposal to defer most of its pension funding contributions for 21 months, including delaying up to $355-million in payments due in 2009. With the pension moratorium, Air Canada will skip payments of $100-million on July 30, $60-million on Aug. 14 and other bills. Retirees will continue to receive their full pension. Federal Finance Minister Jim Flaherty praised union leaders yesterday for "their constructive attitude in getting us to a place where the pension issue can be dealt with in a reasonable way and the company can continue." Air Canada is seeking to avoid filing for bankruptcy protection, and the pension break frees up cash. The cash-strapped airline is also lining up $600-million in collateral-backed loans. "Such new capital is key to Air Canada's ability to ride out the current recession successfully," Air Canada said in a recent letter to retirees. AC.B (TSX) closed unchanged at $1.40.