Post by
lb1temporary on May 31, 2023 2:42pm
CIBC on Pilot Union negociations
Pilot Union Negotiations Set To Begin
This Summer AC’s pilots have ended their 10-year contract framework, signed in 2014, a year early. Key points to consider:
- AC’s pilots elected to use the option that was available to them to terminate the collective agreement after nine years. On May 29, the pilot union had to deem whether AC had met the benchmarks under the 10-year agreement, and if these benchmarks had not been met, they could reopen the agreement on September 29, 2023. We believe the pandemic impacted AC’s ability to meet some of these benchmarks, and given the push by pilot unions to secure higher wages, this move by AC’s pilots is not a surprise. AC’s pilot union had noted publicly that full bargaining with AC would likely begin this summer. There are ~4,500 pilots at AC.
- While ACPA has stated it is seeking “historic” gains, we would note that the union and AC do have a collaborative working relationship as exhibited by the unprecedented 10-year agreement signed in 2014. We believe this creates a solid foundation as both parties eventually start negotiations. The Air Canada pilots group, which recently joined the Air Line Pilots Association (ALPA) expects a notice to bargain to be provided in early June.
- With the current agreement in place until the end of September, the negotiations with the pilots union should not have any impact on AC’s busy summer travel season.
- AC has noted that its cost assumption does include its best estimate of how these labour rates will increase, though it has not disclosed what its underlying assumptions are. Nonetheless, we believe the increase in AC's 2023/24 adj. CASM targets reflect some of the inflationary impact from a new pilot agreement. According to media reports, after 11 years, a top-paid AC B787 pilot earns $313.81 per hour. According to WestJet's deal, a comparable B787 pilot would earn $319.25 per hour as of July 2023, with pay increasing to $347.16 per hour by 2026. While we expect AC's pilot union to focus on what the U.S. airline pilot unions are securing in terms of wage increases, we believe the recent WestJet agreement is a more appropriate benchmark with AC's pilot union looking to ensure they remain the highest paid in the Canadian airline industry.
- In our recent note titled Canadian Airlines: Will Rising Costs Derail The Recovery? (link to note), we view the increase in labour inflation as an industry-wide phenomenon facing the Canadian (and global) airline sector. On a relative basis, we see AC better positioned versus other Canadian airlines to manage through this inflationary environment. We argue that mainline carriers such as AC are better equipped to combat industry-wide inflation as they have more relative pricing power and their customers are less price sensitive versus LCCs/ULCCs. In addition, we believe the current labour environment could impede the aggressive growth plans laid out by the upstart Canadian ULCCs.
Comment by
satchmo6 on May 31, 2023 2:54pm
WEST JET Air pilots are now happy ??????????
Comment by
JuIieRichards on May 31, 2023 4:12pm
As stated in previous posts: AC has noted that its cost assumption does include its best estimate of how these labour rates will increase, though it has not disclosed what its underlying assumptions are.