Air Canada reaches tentative contract deal with its 3,000 pilots

MONTREAL – Air Canada said Friday it has reached its first tentative collective agreement in 2011 after coming to terms with its 3,000 pilots.

The deal is subject to ratification by members of the Air Canada Pilots Association. The current contract expires March 31.

The country’s largest airline is in the process of negotiating with unions representing about 22,400 employees based in Canada. No details of the agreement were being released pending ratification by the pilot’s union and Air Canada’s board of directors.

The tentative agreements comes days after the union representing some 3,800 customer service and sales agents applied for conciliation. The Canadian Auto Workers union local 2002 said it took the step after making little progress in meetings since Feb. 11. The union said its employees have seen cut backs in vacation and break times, while delivering productivity increases and is looking for a wage increase.

Negotiations with CUPE, which represents 6,500 flight attendants are set to begin April 6. No date has been announced for talks with baggage handlers and mechanics represented by the International Association of Machinists and Aerospace Workers.

The union is still determining which employees will be transferred to Aveos Fleet Inc., the maintenance, repair and overhaul business that was spun off from Air Canada in 2004.

Pensions dominated the last round of collective bargaining, with the unions agreeing to provide Air Canada a 21-month holiday on past service pension contributions and fixed payments until 2014.

Industry analysts say Air Canada (TSX:AC.B) could hit some turbulence in the coming months due to rising fuel prices, labour negotiations and increased competition on international routes.

Although the economy is improving, a fragile consumer market will likely force the world’s airlines to absorb higher fuel costs, which will negatively impact 2011 profits.

The airline announced plans this week to cut some unprofitable routes to the United States and within Canada as it trims capacity growth because of sustained high fuel costs.

The number of available seat miles is expected to grow by 4.5 to 5.5 per cent this year, instead of 5.5 to 6.5 per cent predicted on Feb. 10.

Due to improved profitability at the airline, analysts said there was a risk that Air Canada’s labour costs may increase more than expected.

Air Canada flies from 60 Canadian communities to more than 175 destinations around the world. It is the world’s 15th largest commercial carrier with 32 million customers annually.

On the Toronto Stock Exchange, Air Canada shares recovered some of Thursday’s losses as they closed at $2.71, up 4.23 per cent in Friday trading.