By Gnaneshwar Rajan

(Reuters) -Air Canada has reached a tentative, last-minute deal with its pilots’ union over a new four-year collective agreement, the airline said on Sunday, ending a stand-off over pay and benefits and averting a near-term strike or lockout.

The airline, which is Canada’s largest, was preparing to progressively cancel flights over three days and to completely shut down its operations as early as Sept. 18.

Flights will now run as usual. Air Canada and Air Canada Rouge, which operate nearly 670 flights per day carrying about 110,000 daily passengers as well as freight.

Air Canada said the terms of its new agreement with the Air Line Pilots Association (ALPA), which represents more than 5,200 pilots, will remain confidential, pending a ratification vote by members expected to be completed over the next month.

“The new agreement recognizes the contributions and professionalism of Air Canada’s pilot group, while providing a framework for the future growth of the airline,” the carrier said in a statement.

The ALPA said the deal would mean an additional C$1.9 billion ($1.4 billion) in value for members over its four-year term, representing a 46% increase over the previous contract that expired in September 2023.

“After several consecutive weeks of intense round-the-clock negotiations, progress was made on several key issues including compensation, retirement, and work rules,” First Officer Charlene Hudy, chair of the Air Canada ALPA master executive council, said in a statement.

If approved by ALPA members, the deal would be backdated to run from Sept. 30, 2023 to Sept. 29, 2027.

NARROW THE PAY GAP

The two sides had been negotiating a new contract for the past 15 months, with the pilots demanding wage rates that would narrow the pay gap with their counterparts at major U.S. carriers such as United Airlines.

Labour Minister Steven MacKinnon, in a post on the X platform, saluted the efforts of Air Canada and its pilots who he said had shown resolve to get a deal and prevent travel disruptions.

“Negotiated agreements are always the best way forward and yield positive results for companies and workers,” he said.

Prime Minister Justin Trudeau said on Friday the Canadian government would not intervene to end the dispute as it did last month within 24 hours to end a strike at the nation’s two largest rail companies, Canadian Pacific (NYSE:) Kansas City and Canadian National Railway (TSX:).

Air Canada had earlier offered a wage increase of more than 30%, as well as improved pension and health benefits. But the union said the proposal was not good enough for their members who have been working under pay rates and quality-of-life provisions negotiated in 2014.

Pilots at U.S. airlines have negotiated hefty pay raises in new contracts in the past two years amid a travel boom and staffing shortages. United’s new pilot contract, for example, included pay increases of about 42%.

As a result, some United pilots now earn 92% more than their counterparts at Air Canada, data from the pilots’ association shows. In 2013, the pay gap was just 3%.

($1 = 1.3585 Canadian dollars)