MONTREAL – Air Canada could be on the runway to finally securing labour peace as the carrier awaits the federal appointment of arbitrators to resume negotiations with two of its largest employee groups.
The Montreal-based airline said Friday that 10 days of scheduled talks will begin with the union that represents its 8,600 mechanics, baggage handlers and cargo agents.
That comes a week after it unveiled similar plans with its 3,000 pilots.
However, talks can’t begin until Labour Minister Lisa Raitt appoints arbitrators. Her office said the appointments could be made within days.
The country’s largest airline and the two labour unions have said they wouldn’t provide “further comments during the course of these negotiations.”
The ground workers were thwarted from going on strike last month, and Air Canada (TSX:AC.B) was prevented from locking out the pilots, when Raitt sent the matter to the Canada Industrial Relations Board.
The federal government later passed back-to-work legislation that sent the company and the two unions to binding arbitration, although Raitt said repeatedly it would be better for the parties to reach a negotiated agreement.
Industry observers say the resumption of talks was expected because neither side wants to put their fate in the hands of arbitrators in a final-offer selection process.
“This is just one more step in this extremely painful process,” said David Tyreman of Canaccord Genuity.
Despite unique issues such as the launch of a low-cost carrier, he said the pattern for labour deals was set last year with customer service agents and flight attendants.
Under that precedent, wages would increase about two to three per cent annually while a hybrid pension system would be implemented for new hires.
“The reality is there’s simply no more money at Air Canada for more than that anyway,” he said in an interview.
Still, the company surprised analysts late Thursday by disclosing its first-quarter adjusted earnings would range between $170 million and $180 million. That’s more than $100 million higher than some analysts had forecast.
Even though the guidance is positive, the carrier is expected to still lose money in the quarter — 91 cents per share on $2.9 billion of revenues, according to a survey of eight analysts by Thomson Reuters.
That compares with a loss of 45 cents per share on $2.75 billion of revenues in the prior-year period.
Tyreman believes higher revenues through increased fares and ancillary fees are offsetting increased fuel costs since other metrics such as capacity, costs and load factor are consistent with the airline’s prior forecasts.
The results are also consistent with what U.S. carriers have recently reported.
“This is a lot faster and more complete than I expected…and that’s a good sign because the industry seems to be reacting a lot faster now to shocks like fuel prices, which is good for industry profitability.”
Chris Murray of PI Financial Corp. said a resolution to labour issues should provide the next major catalyst to share prices.
Air Canada’s shares took off during trading on Friday, rising more than 14 per cent, or 12 cents at 95 cents on the TSX.
Nearly 1.9 million shares changed hands, compared with 667,000 on an average day.
Air Canada said its results, scheduled for release May 4 ,will include $120 million in charges related to the shutdown of insolvent aircraft repair and overhaul provider Aveos Fleet Performance Inc.
The former Air Canada maintenance division filed for creditor protection last month and laid off more than 2,600 employees across the country when it ceased operations. It is in the process of being liquidated over the next couple of months.
Air Canada’s preliminary estimates indicate it will book a $65-million, non-cash loss on investments resulting from Aveos’ 2010 restructuring.
It also anticipates a $55-million loss from discontinued operations related to labour commitments made under a January 2011 Canada Industrial Relations Board ruling that recognized separate bargaining units for Aveos and Air Canada unionized employees.
Cameron Doerksen of National Bank Financial said he believes the strong earnings guidance is likely the result of lower maintenance expense and better unit revenue.
The closure of Aveos in mid-March likely prompted Air Canada to delay some scheduled maintenance. He said unit revenues should exceed his estimate for 3.1 per cent growth.
Air Canada said it has found alternative heavy maintenance suppliers in the short-term and is beginning a tendering process for longer-term contracts.
Some 23 companies, including Germany’s Lufthansa Technik and Air France, have expressed an initial interest in buying part or all of Aveos’ operations.
Montreal-based Phoenix Aerospace Inc. said Friday it was interested in re-launching part of Aveos’ maintenance activities as a prelude to a major expansion project.
“It is imperative to maintain the strategic knowledge present in this promising industry that could grow exponentially in the coming years,” said company president Serge Prevost.
Phoenix Aerospace currently employs about 90 full- and part-time workers and is prepared to hire dozens of terminated Aveos workers in the short-term to complete the refurbishment of an Air Canada Airbus A320 that sits in an Aveos hangar.
Meanwhile, Quebec Superior Court Justice Mark Schrager approved on Thursday the sale by Aveos of redundant parts to Inventory Navigators for US$593,450 before tax.