How likely is a strike at Air Canada and what impact would it have?

By Nia Williams and Rajesh Kumar Singh

Sept 13 (Reuters) – Air Canada and its pilots are locked in a standoff over a new labour contract. They have until Sunday to reach an agreement that would avoid a strike.

WHAT ARE THE TALKS GOING ON?

If the two parties do not reach an agreement by Saturday, September 14, both will have the option to call either a strike or a lockout, which would trigger Air Canada’s three-day plan to cease operations.

The airline will gradually cancel flights over three days, with a complete suspension of flight operations as early as Wednesday, September 18, at 00:01 EDT (04:01 GMT).

Air Canada CEO Michael Rousseau said on Thursday that his airline was still interested in an agreement, but accused the pilots’ union of making excessive wage demands.

The union has said a strike could be averted if Air Canada negotiates a fair settlement.

WHAT ARE THE IMPACTS OF A STRIKE?

Air Canada and its low-cost subsidiary Air Canada Rouge together operate nearly 670 flights a day, and a suspension of flights could affect 110,000 passengers a day, as well as cargo traffic.

It is Canada’s largest airline and flies to more than 180 airports worldwide. The strike will also likely result in fewer flights for American travelers, as the airline flies passengers from U.S. cities to Europe and Asia through its Canadian hubs.

In a research note, economists at Desjardins estimated that a two-week pilot strike in September could result in a loss of about C$1.4 billion (US$1.03 billion) to Canada’s real GDP, equivalent to a daily loss of about C$98 million.

An Air Canada spokesperson said once the airline begins implementing its resolution plan, there will be disruptions lasting days and weeks.

Air Canada estimates that it will take the maintenance team nearly eight hours to get each aircraft back in service. This means it will take four to five days to get all aircraft back in service.

WHAT ISSUES ARE RELATED TO THE DISPUTE?

Air Canada’s 5,400 pilots are demanding wages that would reduce the pay gap with their colleagues at major U.S. airlines such as United Airlines.

Pilots at American airlines have negotiated significant pay increases in their new contracts over the past two years. The reasons for this were the travel boom and staff shortages. United’s new pilot contract, for example, provided for pay increases of around 42 percent.

As a result, some United pilots now earn 92 percent more than their Air Canada colleagues, according to data from the Air Line Pilots Association, which represents the airline’s pilots. In 2013, the pay gap was just three percent.

The association says Air Canada pilots are working below the pay rates and quality of life provisions negotiated in 2014.

Rousseau said Air Canada offered a wage increase of more than 30 percent in the new contract, as well as improved pension and health insurance benefits.

WILL THE GOVERNMENT INTERVENE?

Prime Minister Justin Trudeau said Friday the government would not intervene and instead intended to put pressure on both sides to avert an attack.

On Thursday, Air Canada took the unusual step of saying the federal government must be prepared to intervene to prevent a strike. While Ottawa has intervened in labour disputes several times over the past few decades, it has always done so after the walkouts had already begun, not before.

Federal Labour Minister Steven MacKinnon has broad powers to resolve labour disputes and intervened within 24 hours last month to end a strike at the two largest railroads, Canadian Pacific Kansas City and Canadian National Railway.

The move was condemned by unions and criticized federally by the New Democratic Party, which helped keep Canada’s minority Liberal government in power with an agreement that gave it automatic support. Earlier this month, NDP leader Jagmeet Singh withdrew his support.

WHAT HAPPENS IF MY FLIGHT IS CANCELLED?

If Air Canada cancels a flight due to a strike by its own employees, the airline must offer passengers a free rebooking on the next available flight operated by any airline, or refund their fare and return them to their point of departure.

Air Canada has offered flexible travel exemptions for passengers flying between September 15 and 23. The airline has said it is also working with other airlines to secure seats for customers to mitigate the impact of the flight cancellations.

However, customers are advised to accept refunds or credits for future travel as other airlines are expected to have limited seat availability.

Under Canada’s Air Passenger Protection Rules, customers are not entitled to financial compensation for costs they incur due to delayed or canceled flights caused by work stoppages when flying within Canada. Passengers traveling internationally may be eligible for compensation. ($1 = 1.3580 Canadian dollars) (Reporting by Nia Williams in British Columbia, David Ljunggren in Ottawa and Rajesh Kumar Singh in Chicago, editing by Deepa Babington)