Air Canada (AC.TO) shares closed the trading day up 4 per cent on Thursday after the company’s pilots voted to ratify a new four-year agreement with the airline.
The Air Line Pilots Association (ALPA), the union representing more than 5,200 Air Canada pilots, says 67 per cent of members voted in favour of the deal. The union says about 99 per cent of eligible pilots cast ballots in the ratification process.
The agreement, reached at the last minute in late-September after more than a year of negotiations, is retroactive to September 2023 and ensures a strike is off the table. There were some concerns about whether the deal would be ratified, as it faced scrutiny from some of its pilots, particularly more recent recruits. The head of the Air Canada pilot union, Charlene Hudy, had said she would step down if members opted to reject the deal.
The new deal adds $1.9 billion in value for its membership, according to ALPA, with a cumulative pay rate increase of 42 per cent over four years.
“This agreement helps restore what Air Canada pilots have lost over the past two decades and creates a strong foundation from which to build on,” Hudy said in a news release on Thursday.
The ratification removes what analysts have said has been “a significant overhang” on Air Canada’s stock. In early August, before the deal was reached, the share price hit as low as $14.90. On Thursday, it jumped as much as five per cent before closing at $17.39, a gain of more than four per cent compared to Wednesday’s close. Year-to-date, the stock is down about six per cent.
The impact of the strike threat is expected to weigh on the airline’s upcoming quarterly financial results, due to higher wage costs related to the ratification of the agreement as well as an increase in the number of customers who likely turned away from Air Canada over concerns about the strike. Some analysts have lowered earnings estimates for Air Canada for the third and fourth quarters.
With the deal now set, analysts expect the company to shift its focus to returning shareholder value, something chief financial officer John Di Bert said on the company’s last quarterly conference call is “high on the priority list.”
“We have indicated that we are focused on creating shareholder value and capital allocation to shareholders, and returning value to them is high on the priority list. And we will do that in due course,” Di Bert said in August.
In a statement, Air Canada chief executive Michael Rousseau says the agreement “gives our company flexibility and creates a framework for future growth of the airline and its network.”
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.
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