Air Canada 2012 Annual Report Download - page 70

2012 Air Canada Annual Report
70
Labour Costs and Labour Relations
Labour costs constituted another one of Air Canada’s largest operating cost items in 2012. There can be no assurance that Air
Canada will be able to maintain such costs at levels that do not negatively affect its business, results from operations and
financial condition. There can be no assurance that future agreements with employees’ unions or the outcome of arbitrations
will be on terms consistent with Air Canada’s expectations or comparable to agreements entered into by Air Canada’s
competitors. Any future agreements or outcome of negotiations or arbitrations including in relation to wages or other labour
costs or work rules may result in increased labour costs or other charges, which could have a material adverse effect on Air
Canada, its business, results from operations and financial condition.
Most of Air Canada’s employees are unionized. In 2011, tentative collective agreements with the CAW, the union representing
Air Canada’s customer service employees at airports and call centres, as well as with CUPE, the union representing Air
Canada’s flight attendants, were concluded and, respectively, ratified or conclusively settled through arbitration. The
agreement with the CAW is in effect until February 28, 2015 and the agreement with CUPE is in effect until March 31, 2015.
In 2011, Air Canada also entered into a collective agreement with UNITE, the union representing the airline’s London
Heathrow-based employees. In the first quarter of 2012, Air Canada concluded agreements with the CAW, in relation to in-
flight crew schedulers and flight operations crew schedulers, and with CALDA, in relation to flight dispatchers. In June 2012,
the decision of the arbitrator was issued in respect of the IAMAW final offer selection arbitration conducted in accordance
with the process legislated by the federal government in the Protecting Air Service Act. The arbitrator’s final offer selection
concluded a new five-year collective agreement between Air Canada and the IAMAW which is in effect until March 31, 2016.
In July 2012, the decision of the arbitrator was issued in respect of the ACPA final offer selection arbitration conducted in
accordance with the process legislated by the federal government in the Protecting Air Service Act. The arbitrator’s final offer
selection concluded a new five-year collective agreement between Air Canada and ACPA which is in effect until April 1, 2016.
ACPA and the IAMAW have, each, independently, instituted proceedings to contest the constitutional validity of the
legislation which referred to arbitration the resolution of the issues that had not been resolved in bargaining. Air Canada is not
a party to these proceedings. Air Canada expects that in both cases the legislation (and therefore the collective agreements
concluded through the arbitration process) will be upheld.
No strikes or lock-outs may lawfully occur during the term of the collective agreements, nor during the negotiations of their
renewal until a number of pre-conditions, in respect of the unions for Canadian-based employees, prescribed by the Canada
Labour Code, have been satisfied. There can be no assurance that collective agreements will be further renewed without
labour conflict or action or that there will not otherwise be any labour conflict or action that could also lead to a degradation,
interruption or stoppage in Air Canada’s service or otherwise adversely affect the ability of Air Canada to conduct its
operations, any of which could have a material adverse effect on Air Canada, its business, results from operations and financial
condition.
Any labour disruption or work stoppage by any of the unionized work groups of Jazz or other parties with whom Air Canada
conducts business could have a material adverse effect on Air Canada, its business, results from operations and financial
condition. In addition, labour conflicts at Star Alliance partners could result in lower demand for connecting traffic with Air
Canada and, ultimately, could have a material adverse effect on Air Canada, its business, results from operations and financial
condition.
Revenue and Alliance Environment
Air Canada also encounters substantial price competition. The prevalence of low-cost carriers, along with the advent of
Internet travel websites and other travel products distribution channels, has resulted in a substantial increase in discounted
and promotional fares initiated by Air Canada’s competitors. A decision to match competitors’ fares to maintain passenger
traffic results in reduced yields which, in turn, could have a material adverse effect on Air Canada, its business, results from
operations and financial condition. Furthermore, Air Canada’s ability to reduce its fares in order to effectively compete with
other carriers is dependent on Air Canada’s ability to achieve acceptable operating margins and may also be limited by
government policies to encourage competition. Likewise, competitors continue to pursue commissions/incentive actions and,
in many cases, increase these payments. The decision to modify Air Canada’s current programs in order to remain competitive
and maintain passenger traffic could result in increased costs to Air Canada’s business.