Air Canada has reached a deal with its pilots that will allow the airline to increase the number of aircraft operating in its low-cost Rouge unit.
Air Canada said in a news release that the Air Canada Pilots Association, which represents 3,500 pilots, agreed to amendments to the current 10-year labour deal that will allow the company to improve flexibility and lower costs.
"These amendments recognize the valuable contribution of our pilots and provide additional flexibility and cost competitiveness that further strengthen Air Canada's ability to compete effectively," Ben Smith, Air Canada's president of passenger airlines, said in a statement.
The agreement permits Air Canada to expand the number of narrow-bodied planes in the Rouge fleet as it expands its mainline fleet.
Under the initial agreement establishing Rouge as Air Canada's low-cost arm, Rouge was limited to a maximum of 50 planes. Air Canada is bumping up against that limit with the current Rouge fleet at 49.
The current Rouge fleet includes 25 Airbus narrow-body planes, while Air Canada's mainline fleet includes 75 narrow bodies in the Airbus A320 family.
Air Canada will begin taking delivery of 61 Boeing 737 Max narrow-bodied planes later this year.
Bombardier Inc. is scheduled to begin delivering 45 CS300 narrow bodies in 2019.
Mr. Smith said on the carrier's fourth-quarter financial results conference call earlier this year that the last plane was scheduled to be added to Rouge before the summer of 2018. He said on that call that Air Canada was in early discussions with its pilots about expanding Rouge.
"They have the capacity to fly some domestic routes, so maybe an expansion would [allow] them to fly – especially in the summer – routes that are more visiting friends and relatives type routes," said airline industry analyst Cameron Doerksen, who follows the company for National Bank.
The arrival of new Boeing 787 wide-bodied aircraft in recent years has fuelled an expansion of Air Canada's network, mainly to foreign markets.
Canada is in the midst of an air travel boom that may enable Air Canada to continue expanding and not retire older airplanes as the new narrow bodies arrived during the next several years.
The airline carried a record number of passengers in a single day earlier this year.
"Demand for air travel seems pretty strong right now, you just have to look at WestJet's traffic numbers yesterday: all-time record for the month of August," Mr. Doerksen said.
Kym Robertson, a spokeswoman for the Air Canada Pilots Association, said the amendments to the deal include a new pension plan for pilots hired after 2012 that is a multi-employer plan that improves on the existing defined contribution plan.
Pilots also won improvements in benefits, scheduling and working conditions, Ms. Robertson said.
"The improvements were achieved in part in exchange for allowing growth of the Air Canada Rouge narrow body fleet," she said.
Air Canada said on its second-quarter financial results conference call last month that traffic grew 13.6 per cent in the quarter, compared with a 13.5 per cent increase in capacity.
It also said that capacity growth will begin to slow.
The 10-year, no-strike deal that Air Canada signed with its pilots in 2014 was based in part on the airline growing, which would provide more opportunities for pilots to move up the ranks.
The carrier said it will deploy its new Boeing 737 Max planes next summer on Toronto-Shannon and Montreal-Dublin routes.
Rouge has generally displaced Air Canada mainline service on leisure routes, where travellers are most sensitive to price, including such flights as Vancouver-Honolulu, Calgary-Las Vegas and Toronto-Budapest.
But it also operates some domestic flights "and we have no restriction on deploying Rouge domestically if that's what we decide to do," Air Canada chief executive officer Calin Rovinescu said on the company's first-quarter conference call earlier this year.