CIBC analyst reactionPlanning For An Orderly Shutdown But Hopeful A Deal With ALPA Can Be Reached
AC announced it is finalizing contingency plans to suspend most of its operations, noting talks continue between the company and the Air Line Pilots Association (ALPA) – representing more than 5,200 pilots at Air Canada and Air Canada Rouge – but the parties remain far apart. Unless an agreement is reached, beginning on September 15, 2024, either party may issue a 72-hour strike or lockout notice, which would trigger the carrier's three-day wind-down plan. AC notes it still sees time to reach an agreement but states ALPA’s wage demands “far exceed average Canadian wage increases”. A few things to note:
Media reports last week noted AC has a ~30% pay hike within the next three years as part of a new pilot agreement. Pilots would receive a minimum 20% increase up front followed by annual raises over a threeyear period. Pilots within one to four years of service would receive more. ALPA has countered that it wants to see AC pilots earn something similar to what U.S. pilots earn. We suspect (again) that there will a lot of pressure for the Canadian government to prevent long disruption to Canada’s transportation sector. We saw the Minister of Labour step in an attempt to stop a labour disruption at WestJet in late June, and more recently, ordered the CIRB to force binding arbitration to end the lockout at the Canadian rails.
AC has implemented a goodwill rebooking policy that should help address some customer concerns. ...........
The threat of a pilot strike at AC is occurring after the peak travel season. That said, we would expect this to impact AC's booking curve in the near term as travellers book with other airlines. If we assume that the strike impacts AC’s booking curve over the second half of September and first half of October as travellers look to avoid a potential labour disruption, according to Radarbox, this accounted for ~9% of AC’s flight activity in 2023.