Air Canada plans to seek about $600 million in financing, partly from government agencies, as part of a broad out-of-court restructuring of the airline, sources say.

Details are still being hammered out as the cash-strapped airline attempts to finalize new labour contracts with unions representing pilot and flight attendants. A tentative deal with the union representing pilots was struck late Monday.

While the government won't contribute directly, it would make credit available through government banking institutions, said Katherine Thompson, president of the Canadian Union of Public Employees, which represents 6,800 flight attendants.

"In this case it would be fully secure," she said during a break in marathon talks. "We're not asking for any kind of handout. Neither is the company."

The government would become a prime, secured creditor, with Air Canada assets pledged to back up the contribution.

The final amount in question is still being worked out. Combined with private funding, the total would be about $600 million, said another source.

Air Canada parent company ACE Aviation Holdings is also expected to pony up some of its cash to help airline.

Canada's largest carrier needs the money to help stay above the $800-million minimum cash balance required by one of its credit-card processors.

Analysts say failure to attract an infusion of cash could force the carrier to file for bankruptcy-court protection for the second time since 2003.

Meanwhile, Thompson said she believes the two sides are in the final stages of discussion.

But her optimism that a deal was imminent waned slightly Monday as the two sides continued to disagree on the meaning of "cost neutrality."

"You can attach a cost to just about anything if you choose to do so," she said.

Finance Minister Jim Flaherty, who appointed a mediator to guide the discussions, met with the parties for about 40 minutes Sunday.

The unions wanted Flaherty's assurance that he would protect key airline assets such as its slots at airport gateways around the world.

Air Canada and its pilots association declined to comment.

Deals struck with some employees

The airline recently reached tentative agreements with service agents, machinists and dispatchers. A 21-month moratorium on past service contributions was also agreed to by retirees.

Some analysts have estimated the move could save Air Canada about $570 million. The airline's pension deficit totals about $2.9 billion.

In exchange, the unions would get an equity stake in Air Canada, which some figure will be around 10 per cent.

Late Monday, Air Canada reached a tentative deal with its pilot union, the Air Canada Pilots Association, including a pension funding holiday, an equity restructuring and a collective agreement on wages and working conditions.

Air Canada's shares closed up two cents to $1.49 in Monday trading on the Toronto Stock Exchange.