Pilots talking strike as labour dispute escalates

Air Canada headed closer to another possible labour disruption Thursday after its pilots began a strike vote in response to what they said was a “rigid” company position that appeared aimed at escalating their contract dispute.

MONTREAL — Air Canada headed closer to another possible labour disruption Thursday after its pilots began a strike vote in response to what they said was a “rigid” company position that appeared aimed at escalating their contract dispute.

A strike mandate after the schedule five days of voting would put the airline’s 3,000 pilots in a legal strike position early on Feb. 17, or 72 hours after the end of a legally manadatory cooling off period.

The strike vote doesn’t mean the pilots will actually initiate a labour stoppage, but it gives the union the ability to respond to any unilateral moves by the company.

“The corporation has tabled a position that asks for more concessions and threatens our entire careers through scope changes that would ship much of our flying outside Air Canada, possibly offshore,” Captain Gary Tarves, chairman of the Air Canada Pilots Association, said in a memo to pilots.

Tarves said the airline’s “rigid position” raises “the possibility that it simply seeks to run out the legislated time clock and lead us toward an escalation.”

The pilots said the company rejected its offer to delay any strike or lockout until April 2 and any strike vote to no earlier than March 22.

Their proposal would have also prohibited the company from changing conditions of pilots employment as is permitted during the “open period” when job action is permitted.

Air Canada CEO Calin Rovinescu told analysts that the airline still hopes to conclude a negotiated settlement despite Tuesday’s expiry of the conciliation period.

“We are prepared to continue negotiating beyond that date and have indicated to ACPA we intend to not impose the new collective agreement in the near term,” he said during a conference call to discuss fourth-quarter and 2011 results.

Air Canada (TSX:AC.B) missed expectations as the country’s largest airline lost $60 million in the fourth quarter of 2011 despite foreign exchange gains of $114 million.

The loss compared with net income of $89 million in the year-ago period, which included foreign exchange gains of $136 million and an impairment charge on aircraft of $49 million.

The airline’s stock fell 13 cents, nearly 10 per cent, to $1.18 in afternoon trading on the Toronto Stock Exchange.

A spokeswoman for Labour Minister Lisa Raitt said the pilots and Air Canada told her in a meeting Monday that there would be no work stoppage and no effect on the travelling public in the short term.

“The minister is encouraged by these commitments and mediators remain engaged with the parties,” said the spokeswoman, Ashley Kelahear.

“The best deal is the one the parties reach themselves.”

The government’s past actions to prevent or limit strikes by Air Canada’s customers service agents and flight attendants suggest it won’t tolerate any disruptions by pilots.

One of the concerns of pilots is Air Canada’s interest in establishing a low-cost carrier for leisure travel.

Rovinescu said participating in this market segment is important, but it will only proceed as long as costs are not allowed to creep back up.

“There are different models and we’re studying them. This is an environment where we have to be open minded to all kinds of business models to effect this transformation.”

The airline’s adjusted net loss per diluted share in the quarter was 64 cents compared with an adjusted net loss of 17 cents in the same quarter the year before.

Air Canada’s revenues were up slightly in the quarter to $2.7 billion from $2.6 billion a year earlier.

The airline was expected to lose 50 cents per share on an adjusted basis on $2.7 billion of revenues in the fourth quarter, according to analysts polled by Thomson Reuters.

That compared with a 27 cents per share profit a year earlier on $2.6 billion of revenues.

For the full year, the airline lost 72 cents per adjusted share on $11.6 billion in revenue, seven cents per share worse than analyst forecasts.

“We again experienced a strong revenue performance in our fourth quarter. However, the revenue growth did not keep pace with the increase in operating costs given the higher price of fuel,” Rovinescu said.

He said the airline faced numerous challenges in the past year, including significantly higher fuel prices, a sluggish economy and difficult labour negotiations.

Air Canada also said it is watching closely as domestic rival WestJet Airlines (TSX:WJA) moves to launch a regional service that threatens to steal market share.

“We have no illusions that they are a strong competitor and a good competitor…(but) it’s too early for us to make any kinds of financial forecasts on how we would respond.”

Rovinescu said Air Canada has worked to expand its international business over the past two years knowing that it faces a mature business in Canada.

Cameron Doerksen of National Bank Financial said the loss in the quarter was better than he had expected, with unit revenues weaker but costs not as bad as forecast.

Revenues were particularly weak on flights to Europe, falling four per cent, due to a weak European economic climate and increased competition.

Premium cabin traffic increased 8.2 per cent in the quarter while yields or pricing declined 2.2 per cent.

“While these results were ahead of our expectations and Air Canada has exceeded its cost transformation run-rate goals, the company still faces several headwinds, notably still unresolved labour issues, higher fuel costs and higher maintenance costs,” Doerksen said in a report.

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