Air Canada is pushing ahead with plans to launch a discount unit over the objections of its pilots’ union, and is seeking to bring in a foreign airline as a minority partner in the venture.
The country’s largest carrier has assigned about 60 airline employees and nearly 30 consultants and lawyers to draw up the blueprint for the low-cost division and to scrutinize up to five other proposals for expansion. The projects are being spearheaded by Ben Smith, Air Canada’s chief commercial officer.
Air Canada chief executive officer Calin Rovinescu has made it clear for months that he wants to launch a new subsidiary with a lower cost structure to compete with discount rivals such as Air Transat and Sunwing.
But the proposal for the new unit has run into headwinds from the powerful Air Canada Pilots’ Association, which is concerned about lower wages and the effect the new division will have on the core airline.
Mr. Rovinescu isn’t eager to engage the union in a meaningful dialogue about having ACPA members fly the discount carrier’s planes, according to officials familiar with the situation, and management is keen on expanding without requiring pilots’ consent.
The fledgling low-cost airline is to be based in Canada to ensure it has a Canadian licence, meaning that the foreign carrier will be restricted to owning a maximum of 25 per cent of the voting rights of the new joint venture.
Montreal-based Air Canada will likely take several more months to firm up partners and other details for the carrier, with the Boston Consulting Group helping to co-ordinate projects, at the airline’s offices on Toronto’s Queen Street, say industry and union officials.
Air Canada is contemplating its corporate strategy amid a labour dispute with its 3,000 pilots. On Tuesday, ACPA said that of those who cast ballots, 97.2 per cent voted for a strike mandate. The voter turnout was also 97.2 per cent.
Federal Labour Minister Lisa Raitt plans to appoint retired judge Louise Otis as a special mediator to resolve the protracted contract impasse. Ms. Raitt credited Ms. Otis last week for serving as the conciliation commissioner who helped produce a tentative agreement between Air Canada and the International Association of Machinists and Aerospace Workers. Ms. Otis is a retired justice of the Quebec Court of Appeal.
Air Canada is examining whether it makes sense to have a number of low-cost units, notably on routes for domestic, transpacific, transatlantic and sun destinations to compete against Air Transat, Sunwing and other charter leisure carriers, according to industry and union sources.
Priscille LeBlanc, the airline’s vice-president of corporate communications, said Tuesday that the company “won’t comment on rumours and speculation.”
Management and the union are trying to bridge a wide gap at the bargaining table, notably differences over plans to launch the low-cost carrier, outsource more flying and introduce pension reforms. Ms. Raitt said the mediator will guide a six-month process in a bid to settle the dispute.
Union leaders are upset that Air Canada wants to emulate Australia’s Qantas, which runs the low-cost, offshore subsidiary Jetstar. The union’s negotiating committee alleged in a memo to pilots last week that Air Canada is seeking to outsource work to “other domestic and foreign carriers either through capacity purchase agreements, joint ventures, or by creating other domestic and/or foreign Jetstar-like airlines.”
Last May, two-thirds of the pilots who voted rejected a proposed contract that had been recommended by union leaders – a pact that would have cleared the way for ACPA members to work at a wholly owned low-cost division.
The previous ACPA contract expired March 31, 2011. After the first stage of conciliation ended, a federal mediator tried to find common ground, but the two sides have been unable to reach an accord over the past three weeks of exchanging revised proposals.
Captain Gary Tarves, chairman of the union’s master executive council, said Ms. Raitt has exercised her right to appoint a special mediator under the Canada Labour Code. Capt. Tarves, ACPA president Paul Strachan and other union officials met Monday with Ms. Raitt in Ottawa.
Air Canada has been urging customers this week to keep booking, noting that the marathon negotiation process has already lasted nearly 17 months. The airline stresses that it has no plans to lock out its pilots.