03/20/2012 10:30 EDT

Air Canada Labour Unrest: Airline Risks Losing Market Share, Travellers' Trust, Analysts Say


Beset by nearly continuous labour unrest and a string of operational hiccups, Air Canada is at risk of losing market share if it doesn’t regain the trust of travellers, analysts say.

Following the sudden shutdown of Aveos, the airline’s primary heavy machinery maintenance provider, anxious travellers are getting mixed messages about how Air Canada’s operations will be affected.

Hours after the company issued a press release on Monday reassuring passengers that it has a contingency plan in place to prevent day-to-day operations from being disrupted, Air Canada lawyers argued in Quebec Superior Court that flights could be cancelled and thousands of passengers left in the lurch if Aveos Fleet Performance Inc. isn’t able to perform repairs.

The airline later said it would provide $15 million in emergency financing to Aveos, which should allow the Montreal-based company to reopen some of its shops and allow it to introduce some additional maintenance work “with greater confidence” in the weeks ahead.

That contradicts the reassurances the company issued earlier that day, when the airline maintained that “the events at Aveos, while disappointing, have no impact on Air Canada’s day-to-day maintenance and repairs.”

None of which, says Queen’s University labour relations expert George Smith, will do much to allay the deeper concerns of Air Canada passengers, whose faith in the company has been repeatedly shaken in recent months by the prospect of labour disruptions.

“Travellers are becoming more and more disillusioned with Air Canada’s service offering, and there are alternatives,” he told The Huffington Post Canada.

“I think people are looking at other options, and will continue to do so. At some point, Air Canada’s economic viability will be threatened again,” he said, referring to the airline’s 2003 bankruptcy protection filing, which prompted a major restructuring effort that included spinning off the company’s maintenance division.

Formerly Air Canada Technical Services, the independent company was renamed Aveos in 2007 and now provides maintenance, repair and overhaul services to a number of airlines.

After shuttering its airframe maintenance business this past weekend, Aveos announced on Tuesday that it is immediately ceasing all operations.

The decision adds another 1,300 of the company's workers to the unemployment rolls. Only 160 of the company's 2,600 Canadian workers will remain to watch over the liquidation process.

The firm has filed for insolvency protection under the Companies’ Creditors Arrangement Act (CCAA).

Chuck Atkinson, president and Directing General Chairperson for Transportation District 140 of the International Association of Machinists and Aerospace Workers (IAMAW), said the shutdown didn’t come as a complete surprise.

“We were under the impression and have always argued that Aveos was not going to be a viable company,” he said. “They’ve always seemed to be in financial difficulty from the beginning.”

Aveos did not respond to HuffPost’s request for comment, but the company has blamed Air Canada for its financial problems.

Ryerson University labour relations expert Maurice Mazerolle says that the sudden shutdown likely left Air Canada “scrambling” for a temporary solution.

“In the short term, they’ll probably make arrangements with other similar companies, but it’s probably at a premium, because [other maintenance companies] have already got their own customers that they’re servicing, and to take on new ones means running overtime shifts for their shops,” he said. “That will be another thing eating into Air Canada’s profits.”

Recently, efforts to minimize costly employee pension obligations and start a low-cost carrier have ratcheted up tensions at the collective bargaining table.

According to Smith, a former senior director of employee relations at Air Canada, in several cases government intervention has made a difficult situation even more precarious. He says workers barred from striking have begun to resort to less conventional -- and arguably more insidious -- means of expressing their discontent.

Last weekend, Air Canada pilots called in sick en masse after federal labour minister Lisa Raitt intervened in two separate labour battles, referring the disputes, which threatened to derail March break travel, to the Canada Industrial Relations Board and tabling pre-emptive back-to-work legislation.

The pilots' absence coincided with foggy weather at Toronto’s Pearson International airport and the tail end of March break, contributing to 23 flight cancellations on Saturday, prompting the airline to file a complaint with the Canada Industrial Relations Board alleging that the pilots’ actions constituted illegal strike activity. The Air Canada Pilots' Association denies that the sick leave was a labour action.

But Smith argued the sick calls were “an inadvertent reaction" to being barred from striking.

“Minister Raitt has tried to legislate certainty, and I think what we have learned over the weekend and what we will continue to learn is that you can’t legislate away people’s rights and the company’s rights … and not have consequences,” Smith said.

“These are complex workplaces, and if employees decide to work-to-rule, if people decide to not work overtime -- there are all kind of ways in a situation where there is no trust between the employee and the employer that uncertainty can continue to prevail,” he added.

It’s a situation that doesn’t bode well for Air Canada’s bottom line.

According to Robert Palmer, spokesman for WestJet, Air Canada’s primary competitor in Canada, the airline hasn’t been tracking the number of calls it has received from Air Canada guests looking to rebook.

“It’s ... difficult to say exactly how much of an impact the situation will have on us, since we’re in the thick of spring break season across the country,” he said in an e-mail. “We have some seats available but obviously, fewer at this time of year.”

But as frustration among Air Canada passengers mounts, Mazerolle predicts that further disruptions will increasingly drive travellers to other airlines, particularly in southern Ontario, where he says the proximity to American airports may lead to increased traffic at the border.

“People will trade off on uncertainty. They’ll pay more if they know that they’re going as opposed to not knowing if they’re going,” he said. “The pressure now is on Air Canada and its unions.

“There should be full page ads by all the signatories of the collective agreements, reassuring the travelling public. Without that, it’s folly. They’re going to lose market share.”

-- With files from the Canadian Press

This story has been edited from its original version. It has been updated to include the latest developments in the liquidation of Aveos.

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