Air Canada warns of higher costs from new agreement with pilots

Air Canada shares tumbled after the airline warned it may face higher operating costs in 2024 as it works out a new labor agreement with its more than 5,000 pilots. The adjusted cost per available seat mile — a key measure of airline expenses — may increase 2.5% to 4.5% in 2024, the Montreal-based carrier said in its earnings report Friday. Shares of Canada’s largest airline fell as much as 7.5% in Toronto trading, the most in a year, and traded at C$17.86 at 1:49 p.m. CFO John Di Bert said on a conference call with analysts that the company is wrestling with cost headwinds from “lagging inflation” as well as regulatory changes and the pending deal with pilots. “A new agreement with pilots will bring a change in wages and other cost-related items,” he said. “We have factored our best estimates into our guidance with a view of the Canadian market.” Regulatory changes in Canada over customer disruptions and higher airport fees and infrastructure costs might also boost operating costs, Air Canada said. The Air Line Pilots Association, representing Air Canada’s aviators, is in a mediation process with Air Canada until June 1. The union has previously said it was looking to close the pay gap with large US airlines, which have significantly increased their pilots’ pay in the past year. WestJet Airlines Ltd., Canada’s second-largest carrier, agreed to a contract in May that included a 24% compensation bump over four years. Pilots in the US are paid 50% to 300% more than pilots in Canada, the union said in a statement responding to Air Canada’s earnings release. “Air Canada is one of the most profitable airlines in North America, but has yet to recognize the value of its pilots and compensate them accordingly,” Charlene Hudy, the union’s local head, said in the statement.<br/>