Air Canada will continue its services without disruption following a tentative agreement reached with its pilots’ union, as announced by the union on Sunday. The airline was initially preparing to cancel flights and possibly halt operations altogether.

In a last-minute move, Air Canada (AC.TO) finalized a tentative four-year collective agreement with the Air Line Pilots Association (ALPA), concluding a pay and benefits dispute that began in May 2023.

First Officer Charlene Hudy, chair of the Air Canada ALPA Master Executive Council, stated, “Although the path to this agreement has been long and challenging, the determined involvement and unity among our pilots have been key in reaching this contract.”

As Canada’s largest airline, Air Canada had plans to gradually cancel flights for three days and completely cease operations starting September 18.

According to the airline, “The new agreement acknowledges the dedication and professionalism of Air Canada’s pilots while establishing grounds for future airline growth.”

Normal Flight Operations Resume

Starting Sunday, Air Canada and Air Canada Rouge will continue to operate normally, managing nearly 670 flights each day that transport around 110,000 passengers, as well as freight.

Details of the new agreement with ALPA, representing over 5,400 Air Canada pilots, will remain confidential until a ratification vote by members is conducted within the next month.

The union remarked, “Ratification will need a majority approval from the voting members, who will shortly receive the Tentative Agreement for their review.”

Hudy remarked that the agreement will “eliminate the outdated ten-year framework” that has governed their conditions.

The ALPA noted the agreement is expected to deliver an additional $1.4 billion in value for its members over four years, translating to a 46% increase compared to the previous contract that lapsed nearly a year ago, on September 29, 2023.

If ALPA members endorse the deal, it will be retroactively effective from September 30, 2023, through September 29, 2027.

Bridging the Pay Discrepancy

For the last 15 months, negotiations have been ongoing as pilots sought to secure wages that would bridge the gap with their peers at major U.S. airlines, such as United Airlines (UAL.O).

The union explained, “We initiated talks with Air Canada to secure a contract that reduces the increasing wage disparities and enhances the quality of life for pilots in the United States versus Canada.”

Air Canada proposed a more than 30% wage increase along with enhanced pension and health benefits, but the union deemed it insufficient for their members who have been working under pay and lifestyle terms set in 2014.

According to the union’s website, “Air Canada pilots are operating under a contract established a decade ago, which means our pay and living conditions are essentially frozen. Meanwhile, Air Canada has expanded significantly, making billions in profits, and top executives’ salaries have doubled.”

Comparing Canadian Pilots’ Salaries with U.S. Peers

Recently, pilots at U.S. airlines have successfully negotiated substantial pay increases as travel demand surges and staffing shortages arise. For instance, United Airlines’ latest pilot contract featured pay hikes of approximately 42%.

This has led to some United pilots earning 92% more than those at Air Canada, according to data from the pilots’ association. Back in 2013, this pay gap was merely 3%.

Government’s Non-Intervention Stance

Prime Minister Justin Trudeau stated last Friday that the Canadian government would not step in to resolve the dispute, in contrast to its swift intervention a month ago to resolve a strike involving the two largest rail companies in the country, Canadian Pacific Kansas City (CP.TO) and Canadian National Railway (CNR.TO).

Canadian Labour Minister Steven MacKinnon praised the commitment shown by Air Canada and its pilots in reaching an agreement to prevent travel interruptions, stating, “Negotiated solutions are always the most effective pathway, yielding positive outcomes for both businesses and their employees.”