April 26, 2018 / 5:17 PM / in 6 months

Canada's WestJet CEO faces labor headwinds as pilots weigh strike

MONTREAL (Reuters) - WestJet Airlines’ new CEO is facing his first major test as the Canadian carrier’s pilots weigh strike action and larger rival Air Canada on Thursday offered to accommodate travelers if there is a disruption.

FILE PHOTO: A West Jet Boeing 737-700 aircraft (L) departs Vancouver International Airport in Richmond, British Columbia February 9, 2011. REUTERS/Andy Clark/File Photo

Shares of WestJet, Canada’s No. 2 carrier, fell close to 3 percent on Thursday, a day after the company’s pilots initiated a strike authorization vote.

WestJet Chief Executive Officer Ed Sims, who stepped into the top job in March, said earlier this month that he aimed to reach a first agreement with unionized pilots this year. WestJet pilots voted in May 2017 to join the Air Line Pilots Association union (ALPA).

ALPA said it intends to begin intensive talks with WestJet starting Friday. Management agreed to meet for only 14 days of bargaining during a 60-day conciliation process, the union said in a Wednesday statement.

“We are committed to negotiating for the next two weeks straight,” said Captain Rob McFadyen, chairman of WestJet’s ALPA Master Executive Council (MEC). “Our focus is on getting an agreement.”

McFadyen said the two sides remained apart over issues like outsourcing and compensation. He said WestJet pilots are looking for compensation “comparable to other pilots in our segment of the industry,” which includes Air Canada.

A WestJet spokeswoman said the carrier is “committed to talking for as long as it takes to reach a settlement benefiting both our pilots and the company.”

Earlier in the day, WestJet played down the possibility of disruptions. “Strike mandates are a relatively common collective bargaining tactic and do not mean that a strike will take place,” it said in a statement.

Air Canada said it was ready to adjust schedules and capacity to limit disruptions for the traveling public in event of labor action at WestJet..

AltaCorp Capital analyst Chris Murray said travel concerns related to the labor dispute were creating “uncertainty” around WestJet and the dispute had the potential to weigh on the carrier’s revenue per available seat mile (RASM), a key metric of an airline’s performance, in the coming months.

“We would not be surprised to hear the company talk about some RASM pressure around Q2 and Q3 because of concerns over labor issues,” he said.

WestJet shares closed down 2.8 percent at C$22.48, while the benchmark Canadian share index finished up 0.8 percent. Air Canada shares shed 0.1 percent.

The strike vote, which was triggered after more than six months of negotiations, will remain open for 15 days, The pilots are allowed to strike starting May 19, McFadyen said.

Reporting by Allison Lampert; Editing by Susan Thomas and Leslie Adler

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