Air Canada said on Sunday that it has reached a preliminary agreement with its pilots' union on a new four-year collective agreement, in a last-minute deal that would prevent a strike or shutdown in the near future.

Before reaching the preliminary agreement, Canada's largest airline was preparing to gradually cancel flights over three days and completely shut down its operations.

With this, Air Canada and its subsidiary "Air Canada Rouge" continue to operate normally.

The two companies operate nearly 670 flights daily carrying 110,000 passengers, in addition to cargo operations.

Air Canada stated in a release that the terms of its new agreement with the airline pilots' association, which represents more than 5,200 pilots, will remain confidential pending a ratification vote by association members next month, while the association announced that the deal includes an increase in wages and benefits for union members of about CAD 1.9 billion, equivalent to USD 1.40 billion over four years, which represents a 46 percent increase from the previous contract that ended in September 2023.

Charlene Hood, the president of the executive council of the association, said, "After several weeks of intense negotiations, progress has been made on many key issues including compensation, pensions, and working rules."

The two sides had been negotiating a new contract for the past fifteen months, as pilots demanded wage rates that would narrow the pay gap with their counterparts at major U.S. airlines.

For example, the new contract for pilots at United Airlines includes wage increases of about 42 percent, resulting in U.S. airline pilots now earning 92 percent more than their counterparts at Air Canada, according to data from the pilots' association, while in 2013 the wage gap was only 3 percent.

Labor Minister Steve MacKinnon said in a post on social media platform "X" that preventing any disruptions in Canadians' travel plans was thanks to the collaboration and work of all parties and federal mediators, while Prime Minister Justin Trudeau stated on Friday that the Canadian government would not intervene to end the dispute as it did last month to resolve a strike at Canada's two largest railway companies.

The airline pilots' association had previously rejected Air Canada's offer of a more than 30 percent wage increase, along with improvements in pensions and health benefits, as the association believes that the offer is inappropriate especially since its members have been receiving wages and benefits agreed upon ten years ago, in 2014, which are much lower than their counterparts in competing companies, especially as they have endured increased demand for travel with a shortage of staff.