The independent tribunal that administers Canada's labour laws, the Canada Industrial Relations Board (CIRB), has deemed the strike by Air Canada's some 10,000 flight attendants illegal and is ordering workers back to the skies. In a decision released Monday morning, August 18, 2025, the CIRB said the defiance of a back-to-work order on Sunday by the Canadian Union of Public Employees (CUPE) is "unlawful."

The order calls on the union to "cease all activities that declare or authorize an unlawful strike of its members and to direct the members of the bargaining unit to resume the performance of their duties" by noon ET, and for the flight attendants themselves to resume their duties "immediately." This decision comes after a hearing on Sunday following a frazzled weekend for travellers. Flight attendants had walked off the job early Saturday morning, leading to hundreds of flights being grounded.

Less than 12 hours after the strike and lockout took effect, Ottawa intervened. Federal Jobs Minister Patty Hajdu invoked a contentious section of the Canada Labour Code, asking the CIRB to send the two sides to binding arbitration and to order the airline and its flight attendants back to work in the meantime to "maintain or secure industrial peace." Air Canada says it hopes service returns ASAP, but CUPE has accused the Liberal government of "rewarding Air Canada's refusal to negotiate fairly by giving them exactly what they wanted." Wages, work rules, and unpaid hours remain key issues in contention.

Market Signals

Sector-wide Implications: The federal labour board's ruling deeming the Air Canada flight attendants' strike unlawful is a significant development for the Canadian airline industry. It signals a period of potential stabilization after a major disruption. However, the union's defiance of the order suggests ongoing labour tensions could persist, impacting future operational certainty for Air Canada and potentially influencing labour relations at other Canadian carriers.
Competitor Positioning: Competitors like WestJet and Porter Airlines may see a short-term increase in demand as travellers seek alternatives or rebook disrupted flights. Porter Airlines has already reported an increase in close-in bookings.
Stock Movements: Air Canada's stock experienced a slight dip of over 1.5% on Monday, August 18, 2025, while broader market indexes remained relatively flat. This suggests an immediate negative reaction to the operational uncertainty, with a potential for recovery as operations normalize.

Winners & Losers

Losers: Air Canada faces significant financial losses due to flight cancellations, reputational damage, and the cost of managing passenger disruptions, having suspended its financial guidance for Q3 and the full year 2025. Passengers faced cancellations, disruptions, and uncertainty, with many potentially incurring additional costs for alternative travel. The Canadian economy is also affected due to potential disruption to critical air cargo, including pharmaceuticals and organ tissue, of which over 40% are moved by Air Canada.

Winners: Competitor airlines (WestJet, Porter) are likely to see increased bookings and potentially higher revenue due to displaced Air Canada passengers. Travel agencies and ancillary services may benefit from increased rebooking and alternative travel arrangements.

Action Timeline

Immediate: For businesses relying on Air Canada for cargo or passenger transport, re-evaluating supply chain logistics and considering alternative carriers for immediate needs is crucial. Companies with flexible travel policies for employees should advise them to book with alternative carriers or delay travel until Air Canada's schedule stabilizes.
Short-term: Competitors who can quickly scale up operations or offer attractive rebooking options for displaced Air Canada passengers could gain market share and customer loyalty.
Long-term: Investors should monitor Air Canada's ability to stabilize its operations and manage the financial impact of the cancellations, as well as the potential outcomes of CUPE's legal challenges against government intervention.

Risk Assessment

Regulatory Risks: The ongoing defiance of a federal labour board order poses a significant regulatory risk for the union, potentially leading to fines or contempt charges.
Market Volatility: Continued operational disruptions or a prolonged legal battle could lead to further negative impacts on Air Canada's stock price and investor confidence.
Labour Relations Escalation: The strong backing of CUPE by other Canadian labour groups could signal a broader trend of increased labour activism, potentially leading to future disputes at other companies.

Regional Perspective

This ruling highlights a growing debate in Canada surrounding the government's use of Section 107 of the Canada Labour Code, which allows it to direct binding arbitration in labour disputes. CUPE and other labour groups view this intervention as an unconstitutional attack on workers' rights, indicating a broader tension in Canadian labour relations. This sets a precedent that could influence future collective bargaining across various industries in the country.

Immediate Implications

Air Canada expects disruptions to continue for the next 7-10 days even after the back-to-work order.
Travellers with Air Canada bookings should check their flight status regularly and explore alternative options.
CUPE faces immediate legal consequences if it continues to defy the CIRB's order.

What to Watch

Union Compliance: The critical indicator will be whether CUPE and its members comply with the CIRB's order by the noon ET deadline on Monday, August 18, 2025, or if they continue their defiance, leading to further legal action.
Legal Challenges: The outcome of CUPE's Federal Court challenge against the binding arbitration order will be significant.
Air Canada's Operational Recovery: The airline's ability to quickly stabilize its schedule and resume normal operations will determine the extent of long-term disruption.
Government Stance: Future government interventions in labour disputes and the use of Section 107 of the Canada Labour Code will be closely watched.

Analysis

The CIRB's ruling marks a crucial turning point in the ongoing Air Canada labour dispute, affirming the authority of federal regulatory bodies. However, CUPE's defiance and subsequent legal challenge indicate that the underlying tensions are far from resolved. Businesses should monitor this dynamic closely, as it could impact the stability of air operations in Canada and set a precedent for future labour disputes. This situation presents an opportunity for competitors to demonstrate resilience and gain market share, but also poses an ongoing risk to supply chains and logistics.