MONTREAL -- One Air Canada union leader said yesterday performance bonuses that will be paid to two top executives by a new equity investor aren't surprising but will do nothing to improve labour relations at the company. "Nothing has changed in the world of Air Canada management; our relationship's worse now than it's every been," said Gary Fane, transportation director for the Canadian Auto Workers union.

Fane said unionized workers will be upset by bonuses Hong Kong-based business-person Victor Li will pay to keep Air Canada chief executive Robert Milton and executive vice-president Calin Rovinescu, who has led the restructuring effort.

Li, who has agreed to invest $650 million in the insolvent airline in return for 31 per cent of the shares of a restructured company, will pay Milton and Rovinescu each one per cent of the airline's shares over four years as a retention bonus.

Fane said such bonuses often happen with this kind of restructuring but unionized workers will be upset because of the sacrifices they have made and because of "how poorly the company is treating customers and employees."

Airline analyst Jacques Kavafian, with Octagon Capital Canada Corp., says he likes the choice of Li as investor and that he is naming five new people to the airline's board of directors.

Li and his family would probably have "a more hands-on approach to their investment" than an institutional investor, Kavafian said.

"That would prevent Air Canada from doing crazy things like it did in the past," Kavafian said.

Although he does not see synergies between Air Canada and Cheung Kong Holdings Inc., the Li family's holding company, Kavafian says Li probably could help Air Canada penetrate new markets in Asia.

Under the deal, creditors such as bond holders, who carry $8 billion to $10 billion of Air Canada's debt, will have the opportunity to convert that into Air Canada shares through a rights offering of $450 million.

Air Canada points to Li's dual Canada-Chinese citizenship as proof the deal will not run afoul of foreign ownership restrictions on Canadian airlines. Foreign control of is restricted to 25 per cent.

Amy Butcher, spokesperson for Transport Minister David Collenette, would not comment directly on Li's citizenship but she said Air Canada knows the rules.

"The stakeholders are aware of the foreign ownership rules and we've been given every indication those rules will be abided by," said Butcher.

"This is one step in Air Canada's restructuring process, a process that we're monitoring carefully and one we're confident Air Canada will emerge from successfully," Butcher said.

Ironically, there was a run on Air Canada shares yesterday, with 12.3 million trading hands and driving the price up to $1.22 before slipping back to close at $1.19, up 11 cents or 10 per cent from Friday's close.

The trading is believed to be contract selling by investors who earlier bought futures contracts on the stock, gambling it would rise and they could profit from the price movement.

The deal announced on the weekend will reserve just 0.01 per cent of the company for existing stockholders.

Based on the price paid by Li, analyst Claude Proulx with BMO Nesbitt Burns evaluates the current share values at 0.0017 cents each. He recommends shareowners sell off the shares which hit a high of more than $20 in early 2000.