VANCOUVER, British Columbia (Reuters)—Air Canada took a positive step overnight in reaching an agreement with most of its unionized workers, but a sluggish economy is still clouding its long-term financial health, an analyst said Tuesday.

Late Monday, Air Canada said it had struck agreements on pension funding and contracts with three of its unions: the Canadian Auto Workers, the International Assn. of Machinists & Aerospace Workers and the Canadian Airlines Dispatchers Assn. The three represent about 16,500 employees, or more than 60% of the airline's unionized workers.

Canada's biggest airline also signed an agreement with the Air Canada Pionairs, an association that serves more than 15,000 retirees of Air Canada and its predecessor airlines, the company said in a statement.

A solution to the airline's pension funding woes and concessions from unions are considered crucial to keeping Air Canada from filing for bankruptcy protection for the second time in six years.

"Of course, the deal is positive. But the main issue is more fundamental. It is the issue of them selling tickets," said Jacques Kavafian, an analyst at Research Capital in Montreal.

"The economy and overcapacity in the industry are bigger concerns," he said.

Negotiations continue with the Air Canada Pilots Assn., representing about 3,200 pilots, and CUPE, whose members are flight attendants.

Pension troubles

Air Canada drew complaints last month when it asked unions to support a moratorium on funding its $2.85 billion Canadian ($2.59 billion) pension deficit.

The Canadian government appointed a mediator last Thursday to try to settle the disagreements between the country's largest carrier and its unions and retirees.

Monday night's pension agreement calls for a moratorium on past service contributions for a 21-month period and fixed payments after that between 2011 and 2013.

The agreement hinges on Air Canada obtaining new financing and each union being granted an equity stake in the company.

To ensure labor stability, the three unions agreed to extend their collective agreements for 21 months, with a provision for no strike or lockout.

There will be no changes to wage rates and pension benefit levels during the extension period, the company said.

"These agreements with three of our unions represent an important milestone in providing stability for our company during this challenging period," Chief Executive Calin Rovinescu said in a statement.