Air Canada cancels flights from Thursday as cabin crew strike looms

By Allison Lampert and Aishwarya Jain

Aug 13 (Reuters) - Air Canada AC.TO is cancelling flights from Thursday, as the country's largest carrier winds down service ahead of a looming Saturday strike by its more than 10,000 flight attendants.

Montreal-based Air Canada said on Wednesday it plans to cease flying on Saturday after its flight attendants' union served a 72-hour strike notice due to stalled contract talks over pay.

Air Canada and Air Canada Rouge carry about 130,000 customers a day. A strike would hit the country's tourism sector during the height of summer travel.

Air Canada is also the foreign carrier with the largest number of flights to the U.S.

The standoff is testing the country's Liberal government under Prime Minister Mark Carney, which was asked by Air Canada to impose arbitration on both sides. Representatives of Carney and Jobs Minister Patty Hajdu did not respond to requests for comment on whether they would take action, such as imposing arbitration that would stop a strike.

Hajdu on Tuesday encouraged both parties to remain at the table until a deal is reached.

The dispute hinges on the way airlines compensate flight attendants. Most airlines have traditionally paid attendants only when planes are in motion.

But flight attendants in North America have sought compensation for hours worked, including for tasks such as boarding passengers and waiting in the airport.

The strike by flight attendants represented by the Canadian Union of Public Employees is set to begin at 12:58 a.m. EDT (0458 GMT) on Saturday.

Air Canada has said customers would be fully refunded for cancellations, which could hit lucrative routes between Canada, the United States, Europe, and Asia.

The airline also issued a lockdown notice beginning 32 minutes after the strike. It had declared a deadlock in negotiations on Tuesday, after the union rejected its proposal for binding arbitration.

The carrier had offered a 38% increase in total compensation for flight attendants over four years, with a 25% raise in the first year.

However, the union said the offer would raise actual wages by 17.2% over four years and was below inflation. Air Canada had offered to compensate flight attendants for some unpaid work, but only at 50% of their hourly rate.

A union spokesperson said its negotiators are awaiting a response from Air Canada after it made a new proposal Tuesday night.

Flight attendants have negotiated with more confidence, encouraged by improved airline earnings in 2024 and bumper pay deals for pilots since the pandemic.

Such concessions would raise labor costs for Air Canada, which reported a drop in second-quarter profit, weighed down by weak passenger traffic to the U.S.