By Allison Lampert, David Ljunggren and Rajesh Kumar Singh

(Reuters) – Canada is reluctant to force Air Canada’s pilots back to work if they go on strike, a government source told Reuters this week, even though Ottawa took that step to end a work stoppage at the country’s two railroads earlier this month.

Air Canada’s estimated 5,400 pilots, who want the airline to offer pay close to the wages earned by their U.S. peers, said on Friday they would strike if necessary as early as Sept. 18

Their 10-year contract expired nearly a year ago, and no negotiations are scheduled, the pilots said. If a strike drags on, the inconvenience to travelers and the economic damage would compound.

The Air Line Pilots Association, which represents the Air Canada pilots as well as those at most U.S. airlines, said it fears federal intervention as happened at the country’s two main freight railways. The government source said Ottawa is committed to collective bargaining and would not be trigger happy when it comes to using its power to end labor disputes.

Labour Minister Steven MacKinnon, who ordered an end to the rail dispute, told union workers on Wednesday his hand had been forced by the extreme economic impact of the rail stoppages. The Teamsters union is challenging the decision in court.

“We found ourselves in exceptional circumstances,” he said.

The two rail companies held an effective duopoly. Air Canada controls about 44% of domestic air travel seat capacity with the remainder divided among at least three other carriers.

Reluctance to intervene at Air Canada could also reflect political considerations. Prime Minister Justin Trudeau’s minority Liberal government depends on support from the pro-union New Democratic Party in parliament. The Liberals also want to win union votes ahead of an election due by end-October 2025.

WAGE GAP

Air Canada pilots have demanded wages closer to counterparts at carriers like United Airlines and Delta although neither the Canadian airline nor its pilots have disclosed specific pay proposals.

United’s pilot contract ratified in September 2023 raised pay about 42% and is estimated to cost the Chicago-based airline more than $10 billion over four years.

Pilots at other U.S. airlines also negotiated hefty pay raises in the past two years amid a travel boom and shortage of aviators. But demand for flights has softened, and earnings are under pressure.

Air Canada, where senior captain salaries of up to C$350,000 ($259,567) a year have been advertised, said on Thursday it intends to reach a deal that recognizes pilots’ contributions but “also takes into consideration travelers’ increasing reluctance to pay higher airfares.”

The Montreal-based airline’s earnings are already weakening. It has slashed its full-year earnings estimates by 18%. Raymond James analysts estimated a 5% increase in pilot wages will increase Air Canada’s costs by C$70 million.

Air Canada’s pilots have said they received annual wage increases of about 2% under their old contract after back-to-work legislation averted a stoppage in 2012.

A Reuters comparison of wages under United’s latest contract and Air Canada’s expired contract, which remains in place for now, showed United pilots earned higher hourly pay at all levels. But the disparity was greater among junior aviators.

For example, a third-year first officer at United flying the A320 narrow-body airliner earns $196.03 per hour, compared with C$81.02 an hour at Air Canada.

“Air Canada has been enjoying a discount on our pilot labor,” said airline union President Charlene Hudy.

Strikes in commercial aviation are rare in North America, but effective. A dispute between Canada’s WestJet Airlines and its mechanics was resolved in one day, after their union this summer vowed to strike until they reached a deal following government efforts to order binding arbitration.

($1 = 1.3484 Canadian dollars)

(Reporting By Allison Lampert in Montreal, David Ljunggren in Ottawa and Rajesh Kumar Singh in Chicago; Editing by Cynthia Osterman)

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