Job security key issue in Air Canada labor talks

* Mechanics worry jobs could go to El Salvador

* Union may seek extended job security

* Talks seen continuing through weekend

By Susan Taylor

OTTAWA, July 3 (Reuters) - Air Canada's (ACa.TO) biggest union may push for additional job security in labor talks with the debt-heavy airline and a federally appointed mediator on Friday, but it doesn't expect a quick resolution.

Senior negotiators from the International Association of Machinists and Aerospace Workers, whose members narrowly rejected a 21-month deal with the carrier this week, are meeting with Canada's biggest airline and mediator James Farley, a union spokesman said.

Mechanics are worried their aircraft maintenance, repair and overhaul work will be transferred to Aveos Fleet Performance Inc in El Salvador, a sister company previously called Air Canada Technical Services that was spun off in 2007.

"What these guys are afraid of is that the work is going to go to this company called Aveos," said IAMAW spokesman Bill Trbovich.

"As it stands now, Aveos does not have the capability to do that work, but there's nothing stopping them from building a hangar to do that. And what we want is assurances that they're not going to take that work out of the country."

Air Canada parent ACE Aviation (ACEa.TO) owns a 27.8 percent stake in privately held Aveos, which has 1,400 staff in El Salvador and 3,300 in Canada.

The union may also push for job security beyond 2011, or the 21-month term in the current contract, he said.

Union support is critical for the cash-strapped airline to gain federal approval for a temporary freeze on pension funding and C$600 million ($517 million) in short-term loans.

Analysts say that labor peace, a moratorium on funding Air Canada's C$2.9 billion pension deficit and fresh financing are essential for the company to avoid filing for bankruptcy for the second time in six years.

There are more than 11,000 technical, maintenance, and operational services workers in the bargaining unit, which voted 50.8 percent against Air Canada's latest offer. Smaller clerical and finance units were strongly in favor of ratification.

Air Canada said on Friday that it would not comment on the current labor talks. After markets closed on Thursday, the company said it would meet with senior union leadership to "achieve a successful conclusion".

It is safe to assume that talks will continue through the weekend, Trbovich said.