Air Canada begins preparations for shutdown due to ‘inflexible’ union demands

Air Canada is finalizing plans to suspend most of its operations, likely beginning Sunday, as talks with the pilot union are nearing an impasse over "inflexible" wage demands, the country's largest airline said on Monday.

Air Canada and its low-cost subsidiary, Air Canada Rouge, operate nearly 670 flights daily. Unless they reach a settlement with the union, the shutdown could affect 110,000 passengers daily, causing widespread disruptions.

The airline's pilots have been pushing to close the salary gap with their U.S. peers, who managed to strike lucrative labor deals in 2023 amid pilot shortages and strong travel demand.

"Air Canada believes there is still time to reach an agreement with our pilot group, provided ALPA moderates its wage demands which far exceed average Canadian wage increases," CEO Michael Rousseau said on Monday.

The Air Line Pilots Association (ALPA), which represents more than 5,200 pilots at Air Canada, did not immediately respond to a Reuters request for comment.

Talks between the airline and union are continuing, but both parties remain far apart, the company added.

ALPA's pilots have previously said the current pay rates at U.S. rival Delta Air Lines are up to 45% higher than the Canadian carrier's hourly pay rates.

"We appreciate their (Air Canada pilots) frustration, but also note that the situation is not exactly apples to apples given the barriers to entry around pilot supply in the U.S.," TD Cowen analyst Thomas Fitzgerald wrote in a note last week.

The union and the airline entered into a mandated three-week cooling-off period, during which the union cannot go on strike, on Aug. 27.

Air Canada anticipates it would take seven to 10 days for normal operations to resume once the complete shutdown is in place.

The airline's shares are down more than 18% this year.

The company is in talks with other airlines to accommodate its stranded passengers in the event of flight cancellations, it said, adding that flights under the Air Canada Express brand will continue to operate as they are operated by third-party carriers.