Wings Magazine

News
Air Canada opens contract talks with pilots

Sept. 15, 2014, Montreal - Air Canada is moving to begin contract negotiations with its pilots union early in hopes of avoiding the acrimony that marked the last round talks that ended up being eventually settled by a federal arbitrator.


September 15, 2014
By The Canadian Press

"We are in talks to determine if there is basis for achieving an
early renewal of the pilots' collective agreement," Air Canada
spokeswoman Isabelle Arthur wrote in an email.

 

The pilots union typically has four-year deals, but a
five-year deal retroactive to April 2011 was selected in 2012 in
final-offer arbitration.

Advertisment

 

The Air Canada Pilots Association said the
airline approached it to discuss changes prior to the contract's expiry
March 31, 2016.

 

"The current contract is the result of an
arbitration award and our members would also like to see changes and
improvements, which we are discussing with Air Canada," said an union
spokesman who was unwilling to provide details.

 

Chris Murray of AltaCorp Capital said a longer contract would offer additional stability.

 

"We believe a longer-term agreement,
particularly in advance of the current expiry in the first quarter of
2016, would be very constructive in reducing the company's risk
profile," he wrote in a report following recent meetings with airline
management.

 

In addition to pilots, Air Canada is set to open
talks with flight attendants and customer service representatives,
ahead of the contract's expiry March 31, 2015.

 

"We are presently preparing for the next
bargaining round. We will consult our members soon to set our
priorities," said Michel Cournoyer, president of the Air Canada
Component of CUPE, which represents 6,500 flight attendants.

 

Murray said Air Canada  indicated that
unlike the last round of negotiations there are just "a few number of
highly contentious issues" for flight attendants and customer service
workers this time.

 

The Canadian Union of Public
Employees is challenging a federal decision to reduce the ratio of
flight attendants to passengers required on aircraft even though the
change was granted to competitors Transat, WestJet
and Sunwing and is common practice among international carriers.

 

No hearing dates have been set, but Murray said he expects the challenge will fail.

 

Air Canada's last round of labour talks were
among the most acrimonious in its history. They included a 12-hour
illegal walkout by baggage handlers and ground staff that disrupted
flights, the tabling of a back-to-work bill in Parliament and
final-offer selection in which an arbitrator sided with the airline.

 

The contract preserved employee compensation and
benefits but among other things moved new hires to a cheaper
defined-contribution pension plan.

 

It paved the way for the launch of low-cost
subsidiary Rouge that is able to service leisure markets more profitably
by using lower-wage employees and planes with more seats. And it
allowed the country's largest carrier to remove smaller Embraer regional
jets from its fleet. Some of the planes were transferred to private
non-union carrier Sky Regional Airlines.

 

"It provides the company with the
necessary flexibility to compete effectively in the current industry
environment," CEO Calin Rovinescu said following the arbitrator's
decision.

 

Air Canada's shares soared after the airline
moved from the shadow of the challenging labour period. They were the
top performer of all public companies in Canada in 2013 and peaked at
$10.90 over the past 52-weeks before falling back.

 

However, the stock was up 56 cents or 6.6 per cent to $9.04 in heavy trading Monday of more than 4.5 million shares.

 

David Tyerman of Canaccord Genuity has a
one-year target of $13, saying the airline's earnings have potential to
grow because of initiatives such as Rouge, more seating in Boeing 777s
and new Boeing 787 Dreamliners that together are expected to reduced
costs by 15 per cent.

 

Tyerman also said labour negotiations may be
different this time "as the federal government demonstrated a
willingness to step in quickly in the last negotiations."

 

Meanwhile, airline chief financial
officer Michael Rousseau told a recent conference that he expects a
second wave of cost reductions beyond the 15 per cent target from the
restructuring of the capacity purchase agreement with regional partner
Chorus Aviation and the narrow-body fleet upgrade to Boeing
737 Max in 2017-2021.

"As Air Canada continues to reduce their cost
base, long-run sustainable profits become more tangible," noted Walter
Spracklin of RBC Capital Markets.