UPDATE 2-Air Canada to get more flexibility on maintenance, union upset

(New throughout, adds reaction from union, opposition party)
By David Ljunggren
OTTAWA, March 24 (Reuters) - Canada announced on Thursday it
would give Air Canada AC.TO more leeway to decide where its
planes are maintained, prompting union protests that the move
could cost thousands of jobs.
Transport Minister Marc Garneau said Air Canada, currently
bound by a 1988 law spelling out where in Quebec, Manitoba and
Ontario it must carry out maintenance, needed more flexibility
to be competitive.
He unveiled proposed changes to the law, known as the Air
Canada Public Participation Act, that would give Air Canada more
say in deciding where the work is done and permitting some to be
carried out abroad.
"We're allowing Air Canada to compete internationally in
this respect because ... it is important for them to be able to
play on more of a level playing field," Garneau told reporters.
Quebec, citing the original act, had launched a lawsuit
against Air Canada for not doing enough maintenance in the
province. It dropped the case last month after the airline
agreed to buy jets from Montreal-based Bombardier Inc BBDb.TO
and service them in Quebec for 20 years.
The International Association of Machinists and Aerospace
Workers said it would press the federal Liberal government to
change its mind.
"The Liberals are on the verge of changing a law which will
confirm the loss of thousands of jobs ... they have just given
carte blanche to Air Canada," the union's Quebec coordinator
David Chartrand said in a statement.
A spokesman for Garneau said the 1988 act was outdated and
in places referred to facilities and jobs that did not exist
anymore. He also noted Air Canada had struck a separate deal
last week with Manitoba to end litigation over the amount of
work done there.
The ruling Liberals have a majority in the House of Commons
and the legislation looks certain to be adopted after it has
been studied.
Tom Mulcair, leader of the left-leaning opposition New
Democrats, told reporters in Ottawa the new rules meant the
airline could get away with doing very little work in Canada.
Air Canada wants an end to the 1988 act, which limits
foreign ownership to 25 percent and obliges the carrier to
operate in both of Canada's official languages and keep its
headquarters in Montreal.
Garneau made clear last month these particular stipulations
would remain the same.