(Bloomberg) -- WestJet Airlines Ltd.’s appointment of a new chief executive officer opens the way for Canada’s No. 2 carrier to hammer out a labor deal with its pilots over the next few months, a union leader said.
Relations had soured between the union and CEO Gregg Saretsky as WestJet pilots sought their first bargaining agreement. Those negotiations now fall to Ed Sims, who succeeded Saretsky on his surprise retirement Thursday.
“I’m optimistic that we can come to an agreement in a relatively short period of time,” said Captain Rob McFadyen, chairman of the WestJet unit of the Air Line Pilots Association. “I don’t think there is any reason we can’t have this done within the next few months.”
At issue in the labor talks is the push by the Calgary-based company to get a new discount operation up and running. A contract risks eroding the carrier’s cost advantage over larger rival Air Canada, just as WestJet is also seeking to expand long-haul flights.
Saretsky’s departure “is an acknowledgement that WestJet’s ambitious strategies to grow the airline, explore new markets, penetrate new segments, expand and diversify the fleet, and offer a host of new ‘frills’ and services has taken its toll on the airline’s once-prized culture,” Ben Cherniavsky, a Raymond James analyst, said Friday in a note to clients.
“The culmination of all this stress was, in our view, the decision among the pilots to form a union last year,” said Cherniavsky, who cut his recommendation on the shares to hold from buy.
WestJet fell less than 1 percent to C$23.92 at 10:46 a.m. in Toronto, after tumbling 4.5 percent on Thursday.
WestJet and its pilots have been in negotiations since September. The Air Line Pilots Association has entered a conciliation process with the carrier that is expected to conclude at the end of April, the union said earlier this week.
The Canada Industrial Relations Board recently issued a cease-and-desist warning to WestJet after ALPA had complained that the airline was negotiating employment terms and conditions at Swoop -- the company’s new ultra-low-cost unit -- directly with pilots instead of going through the union.
Pilots “have always been very willing to work with management,” McFadyen added, saying he hasn’t talked to Sims yet but is eager to do so soon. “There’s nobody else in WestJet that has more of a vested interest in the success of the airline. Some of us will spend our entire careers at WestJet.”
WestJet “remains committed to engaging in constructive dialogue with ALPA and we are optimistic we will come to a fair and reasonable agreement,” airline spokeswoman Lauren Stewart said Thursday in an email. Sims, a 54-year-old dual citizen of New Zealand and the U.K., has more than 30 years of experience in the travel industry.
Saretsky had irked the union in recent months by suggesting the company was in no hurry to reach a labor deal. Speaking at WestJet’s investor day in December, the former CEO said “there are no time limits” on negotiating with the pilots.
“JetBlue has been negotiating for five years with its pilot groups since they unionized with ALPA, and there’s still no agreement,” he said Dec. 6. “That might be the case here, too.”
Asked last month if Swoop would start operating before it had a deal with its pilots, Saretsky said, “We will be airborne in June one way or the other.”
The dispute highlights the risk in WestJet’s strategy of creating a discount arm while also seeking to expand long-haul service with new Boeing Co. 787 Dreamliner aircraft, said Chris Murray, an AltaCorp Capital analyst. Saretsky “took an unusually aggressive stance, almost antagonistic,” Murray said.
McFadyen declined to address Saretsky’s recent comments directly, saying only that the union’s complaint to the industrial relations board shows “it’s been challenging for the last little while.”
ALPA represents about 1,500 pilots at WestJet’s mainline and about 500 at the company’s short-haul unit, Encore.
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