By Allison Lampert, David Ljunggren and Rajesh Kumar Singh

(Reuters) - Canada is reluctant to force Air Canada's pilots back to work if they go on strike, a government source told Reuters this week, even though Ottawa took that step to end a work stoppage at the country's two railroads earlier this month.

Air Canada's estimated 5,400 pilots, who want the airline to offer pay close to the wages earned by their U.S. peers, said on Friday they would strike if necessary as early as Sept. 18

Their 10-year contract expired nearly a year ago, and no negotiations are scheduled, the pilots said. If a strike drags on, the inconvenience to travelers and the economic damage would compound.

The Air Line Pilots Association, which represents the Air Canada pilots as well as those at most U.S. airlines, said it fears federal intervention as happened at the country's two main freight railways. The government source said Ottawa is committed to collective bargaining and would not be trigger happy when it comes to using its power to end labor disputes.

Labour Minister Steven MacKinnon, who ordered an end to the rail dispute, told union workers on Wednesday his hand had been forced by the extreme economic impact of the rail stoppages. The Teamsters union is challenging the decision in court.

"We found ourselves in exceptional circumstances," he said.

The two rail companies held an effective duopoly. Air Canada controls about 44% of domestic air travel seat capacity with the remainder divided among at least three other carriers.

Reluctance to intervene at Air Canada could also reflect political considerations. Prime Minister Justin Trudeau's minority Liberal government depends on support from the pro-union New Democratic Party in parliament. The Liberals also want to win union votes ahead of an election due by end-October 2025.

WAGE GAP

Air Canada pilots have demanded wages closer to counterparts at carriers like United Airlines and Delta although neither the Canadian airline nor its pilots have disclosed specific pay proposals.

United's pilot contract ratified in September 2023 raised pay about 42% and is estimated to cost the Chicago-based airline more than $10 billion over four years.

Pilots at other U.S. airlines also negotiated hefty pay raises in the past two years amid a travel boom and shortage of aviators. But demand for flights has softened, and earnings are under pressure.

Air Canada, where senior captain salaries of up to C$350,000 ($259,567) a year have been advertised, said on Thursday it intends to reach a deal that recognizes pilots' contributions but "also takes into consideration travelers' increasing reluctance to pay higher airfares."