Air Canada (AC.TO) has paused its financial guidance as its flight attendants’ strike enters its third day, costing the airline an estimated $60 million in daily revenue, according to National Bank analyst Cameron Doerksen.
Previously, Doerksen had forecast Air Canada’s third-quarter revenue at $68 million. The airline is still generating some revenue because Air Canada Express regional flights continue. These flights account for roughly 20 per cent of passengers, but likely represent a smaller share of revenue, he says in a note.
Last Saturday, Air Canada’s flight attendants went on strike, grounding most of the airline’s flights. However, the federal government intervened, directing the Canadian Industrial Relations Board (CIRB) to impose a process of binding arbitration, which the CIRB did on Sunday. Subsequently, the CIRB issued a return-to-work order, directing both Air Canada and its flight attendants to resume operations.
The Canadian Union of Public Employees, which represents the flight attendants, has not complied. In response, the CIRB declared the walkout illegal and ordered the union to provide written confirmation by noon Monday that it has revoked the strike authorization.
“We will not be returning to the skies this afternoon,” CUPE national president Mark Hancock said at a press conference shortly after the deadline passed. He also says the union will continue fighting for its flight attendants and the right to collective bargaining.
Currently, all flights by Air Canada and Air Canada Rouge are cancelled until the afternoon of August 19.
Although the airline is not paying to operate flights during the strike, it continues to face significant fixed costs. For comparison, in the early months of the COVID-19 shutdown, Air Canada’s daily EBITDA (earnings before interest, taxes, depreciation and amortization) loss was $9 million. This time, Doerksen estimates losses could reach $25 million per day since operations are structured for a quick restart. National Bank’s EBITDA forecast for the third quarter remains at $1.3 billion.
Lower-than-projected jet fuel prices might partially offset the labour disruption costs, however. Doerksen cites fuel at $0.85 per litre versus $0.90, and $0.95 per litre projected in Air Canada’s fourth quarter, which could provide a $185 million boost to National Bank’s 2025 EBITDA estimate.
Doerksen doesn’t expect the strike to last much longer, citing the disruption to travellers and the broader Canadian economy. Once resolved, he expects a 40 per cent increase in flight attendant compensation, representing a 1.2 per cent overall cost increase for Air Canada over four years.
