Air Canada and the union representing its pilots reached a tentative agreement over a new four-year collective labor arrangement, the company said early on Sunday, in a last-minute deal that will likely prevent a near-term strike or lockout.
Before the tentative agreement was reached, Canada's largest airline had been preparing to progressively cancel flights over three days and completely shut down its operations as early as 12:01 a.m. EDT (4:01 a.m. GMT) on Wednesday, Sept. 18.
Air Canada and Air Canada Rouge, which operate nearly 670 flights per day carrying about 110,000 daily passengers and freight, will now continue flying as usual, the airline said.
Air Canada said in a statement the terms of its new agreement with the Air Line Pilots Association (ALPA) representing more than 5,200 pilots will remain confidential, pending a ratification vote by its members expected to be completed over the next month.
The ALPA said the deal would mean an additional C$1.9 billion ($1.40 billion) in value for members over its four-year term, representing a 46% increase over the old contract that expired in September 2023.
"After several consecutive weeks of intense round-the-clock negotiations, progress was made on several key issues, including compensation, retirement and work rules," said First Officer Charlene Hudy, chair of the Air Canada ALPA master executive council.
The two sides have been negotiating a new contract for the past 15 months, with the pilots demanding wage rates to narrow the pay gap with their counterparts at major U.S. carriers such as United Airlines.
Labour Minister Steve MacKinnon said in a post on X that travel disruptions for Canadians were prevented thanks to the hard work of the parties and federal mediators.
Prime Minister Justin Trudeau said on Friday that the Canadian government would not intervene to end the dispute like it did last month, within 24 hours, to end a strike at the two largest rail companies, Canadian Pacific Kansas City and Canadian National Railway.
Air Canada had earlier offered a wage increase of more than 30%, as well as improved pension and health benefits. But the union said the proposal was not good enough for their members who have been working under pay rates and quality-of-life provisions negotiated in 2014.
Pilots at U.S. airlines have negotiated hefty pay raises in new contracts in the past two years amid a travel boom and staffing shortages. United's new pilot contract, for example, included pay increases of about 42%.
As a result, some United pilots now earn 92% more than their counterparts at Air Canada, the pilots' association's data shows. In 2013, the pay gap was just 3%.