By Ross Marowits, The Canadian Press
TORONTO - Air Canada's pilots union says the federal government has a role in ensuring that well-paying Canadian jobs don't get shipped overseas if the airline makes good on its plan to create a low-cost carrier.
"There is a genuine public policy interest here and I think government really needs to pay attention," Capt. Paul Strachan, president of the Air Canada Pilots Association, said Monday.
The Montreal-based carrier is musing about launching a low-cost carrier, possibly with the minority investment of a foreign airline, an issue that has been central to contract talks between the company and its pilots. The two sides have begun federally mediated talks to avert a labour stoppage and reach a new collective agreement.
The union fears Canadian jobs will be lost to cheaper overseas workers, just as happened in the shipping industry years ago when companies started sailing under flags of convenience.
"Do we want planes registered in Liberia, flown by crews that come from wherever?" Strachan said in an interview.
Strachan said the airline's 3,000 pilots need to see a road map about how the airline sees the new carrier operating over the next five to 10 years. Failing to include Canadian pilots would simply mean proceeding with "a Trojan Horse on wages and working conditions, which is really not in anybody's best interests," he said.
The low-cost carrier would look artificially profitable if the mainline airline is weighed down with fixed costs while revenues are moved to the new entity, he added.
That's the situation happening in Australia between Qantas Airlines and low-cost subsidiary Jetstar, which Air Canada (TSX:AC-B.TO - News) has said is one of the models it is considering. The effort is to get around pilot union scope clauses that limit who can fly its planes.
"The net effect to Australia is that those jobs are gone."
Air Canada (TSX:AC-B.TO - News) declined to comment on its efforts and reports that it has a team of 60 employees and 30 consultants and lawyers assessing the situation.
"We do not comment on rumours and speculation," spokeswoman Isabelle Arthur said in an email.
Air Canada CEO Calin Rovinescu is determined to create a new lower cost business model to help the carrier ensure its long-term profitability to compete against rivals such as Air Transat (TSX:TRZ-B.TO - News), WestJet Airlines (TSX:WJA.TO - News) and Sunwing.
He has previously said it would only set up a low-cost carrier if it had the support of its employees. Partnering with a foreign partner would seem to signal a change in the airline's approach.
While pilots have yet to see the airline's plans for a low-cost carrier, Strachan said he's optimistic that a deal can be reached if the mainline carrier isn't hollowed out by the new model.
"I'm certain that the parties both committed to the process can come to some agreement that works."
Cameron Doerksen of National Bank Financial said Air Canada's approach won't necessarily be an exact copy of Jetstar.
"I suspect that Air Canada would probably want to at least pose something to them (pilots) first before moving ahead on their own," he said from Montreal.
Benoit Poirier of Desjardins Capital Markets said any Air Canada low-cost venture won't likely be in place until 2013, at the earliest.
"We view this development at Air Canada as a slight negative for Transat," he wrote in a recent report.
Air Canada's plan to use 50 aircraft would slightly increase capacity on leisure markets, but would not be as large as some industry participants suspect.
Meanwhile, Jetstar CEO Bruce Buchanan said that competition among low-cost carriers in Asia will mean that Air Australia won't be the last niche players to disappear.
Thousands of passengers were stranded when the low-cost airline ceased operations Friday.
"I think we'll see some further consolidation," Buchanan was quoted by The Australian newspaper on Sunday.
He said low-cost carriers had advantages of scale in areas such as purchasing power, spare parts, operations and marketing.
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