Air Canada's new pilot agreement removes 'a significant overhang' on the stock: Analysts

Air Canada's tentative, four-year agreement with the union representing its pilots removes a significant overhang on the airline's beleaguered stock, analysts say, as shares jumped on Monday. Canada's largest airline reached a deal with the Air Line Pilots Association (ALPA), the union representing more than 5,200 Air Canada pilots, on Sunday, averting a strike and widespread flight cancellations. Air Canada says the terms of the tentative agreement will remain confidential pending a ratification vote by union membership, which is expected to occur next month. ALPA says the agreement adds $1.9b in value for its membership, with a cumulative pay rate increase of 42% over four years. The last agreement expired in September 2023. Shares of Air Canada jumped nearly 8% in early trading on Monday. The stock was up approximately 4% as at 11:50 a.m. ET on the Toronto Stock Exchange, trading around $16.42. The new collective agreement removes "a significant overhang that has weighed on shares" during the airline's post-pandemic recovery, says ATB Capital Markets analyst Chris Murray. It also allows Air Canada to shift its focus to other initiatives, such as share buybacks and adding aircraft to the fleet. "The absolute focus for most of the year has been getting to a settlement with the pilots that they can work with, that keeps the pilots happy and allows the airline to move forward," Murray said in an interview with Yahoo Finance Canada, adding that Air Canada has been cautious about things that investors have been looking for, including share buybacks. Murray has an "outperform" rating on Air Canada, with a $26.50 share price target.<br/>