Air Canada pension "deal" thwarted by union feud = = = = Wednesday March 31, 6:38 PM EST = (Adds Jallet comments paragraphs 9-11) By Charles Grandmont MONTREAL, March 31 (Reuters) - Air Canada (AC) said on Wednesday it had r= eached a key pension agreement with its largest union, but the Canadian h= ead of the machinists union dismissed the airline's claim, saying there w= as no deal. "Our members' pensions are not negotiable," said Dave Ritchie, Canadian g= eneral vice-president of the International Association of Machinists and = Aerospace Workers. Earlier in the day, Air Canada said it had reached a tentative agreement = on pensions with Jean Jallet, the head of a local section of the union, w= hich represents Air Canada's 11,500 maintenance and ground crew. Air Canada chief executive Robert Milton praised the union for the "decis= ive attempt to break the logjam currently threatening our successful rest= ructuring executive." = But Ritchie said Jallet had no authority to bargain on pensions issues, w= hich are dealt with at a national level. "There is no deal and Air Canada knows it," Ritchie said, adding that uni= on lawyers warned the company months ago that pension issues could not be= negotiated at the local level. Air Canada said it still considered the tentative agreement to be valid a= nd expects the union to complete a ratification vote by April 12. "We have always reached agreements with Mr. Jallet and not the national o= ffice," Air Canada spokeswoman Isabelle Arthur said. Jallet said union bylaws give him clear authority to negotiate the agreem= ent on pensions. "I don't understand what's going on. Quite frankly, there are political g= ames going on," Jallet said. "Maybe it's because I said I would run against him in the next elections,= " he said. The machinists union was the first to agree to the pension overhaul deman= ded by Air Canada's new equity investor, Hong Kong businessman Victor Li.= Eight other unions, representing around two-thirds of the airline's workf= orce, still reject Li's revamped pension plan, even though Li has warned = he would abandon his C$650 million ($500 million) investment if pensions = are not changed. "There is no discussion on the subject," a spokesman for the powerful Air= Canada Pilots Association said on Wednesday. "Right now, our position has not changed," said Pamela Sachs, head of the= flight attendants union. The unions argue they have already agreed to C$1.1 billion in labor cost = concessions in exchange for a guarantee that their pensions would remain = intact. Li stands to get 31 percent of the airline once the restructuring is over= , but he wants to reduce its risks and costs by shifting the pension plan= s to a defined contribution structure instead of a defined benefits struc= ture. Air Canada's C$8.5 billion pension plans have a deficit of C$1.2 billion.= The airline is trying to convince regulators to let it spread its reimbu= rsement over a 10-year period, twice the length required by law. On Monday, the world's 11th largest airline won an extension of its bankr= uptcy protection until April 15 so it can try to break the impasse on the= pension issues. Further delays in the restructuring are also threatening C$1.8 billion in= loans and aircraft financing deals the carrier has with General Electric= Capital Corp. (GE). Air Canada stock gained 22 Canadian cents, or 20 percent, to C$1.32 on th= e Toronto Stock Exchange on Wednesday, even though the airline has said t= he stock will be worthless once it emerges from court protection with a n= ew equity structure. ($1=3D$1.31 Canadian) = =A92004 Reuters Limited. = Roger EWROPS