Sept 13 (Reuters) - Air Canada ( ACDVF ) and its pilots are locked

in a standoff over a new labor contract and face a deadline by

Sunday to reach a deal that would avert strike action.

WHERE DO THE TALKS STAND?

If the two parties do not reach an agreement by the end of

Saturday, Sept. 14, they will both have the option to issue

either a strike or lockout notice, which would trigger Air

Canada's ( ACDVF ) three-day plan to wind down operations.

The airline would progressively cancel flights over three

days, with a complete shutdown as early as 00:01 EDT (0401

GMT)on Wednesday, Sept. 18.

On Thursday, Air Canada ( ACDVF ) CEO Michael Rousseau said the

airline was still committed to reaching a deal but accused the

pilots' union of making excessive wage demands.

The union has said a strike could be averted if Air Canada ( ACDVF )

negotiates a fair agreement.

WHAT IMPACT WOULD A STRIKE HAVE?

Air Canada ( ACDVF ) and its low-cost Air Canada Rouge subsidiary

together operate nearly 670 flights per day, and a shutdown

could affect 110,000 passengers daily as well as freight

carriage.

It is Canada's largest airline, flying to more than 180

airports around the world. The strike will also likely result in

fewer flights for American travelers as the airline flies

passengers from U.S. cities to Europe and Asia through its

Canadian hubs.

In a research note, Desjardins economists estimated a

two-week pilot strike could result in a loss of around C$1.4

billion ($1.03 billion) to Canada's real GDP in September,

meaning daily losses of roughly C$98 million.

A spokesperson for Air Canada ( ACDVF ) said once the airline starts

implementing its wind-down plan, it would cause days and weeks

of disruptions.

Air Canada ( ACDVF ) estimates it can take close to eight hours for

its maintenance team to have each aircraft ready for a return to

service. That means it will take four to five days to bring all

aircraft back into service.

WHAT ARE THE ISSUES INVOLVED THE DISPUTE?

Air Canada's ( ACDVF ) 5,400 pilots are demanding wage rates that

would narrow the pay gap with their counterparts at major U.S.

carriers such as United Airlines.

Pilots at U.S. airlines have negotiated hefty pay raises in

new contracts in the past two years, helped by 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 ( ACDVF ), according to data from the Air Line

Pilots Association, which represents the carrier's pilots. In

2013, the pay gap was just 3%.

The association says Air Canada ( ACDVF ) pilots are working under pay

rates and quality-of-life provisions negotiated in 2014.

Rousseau said Air Canada ( ACDVF ) had offered a wage increase of more

than 30%, as well as improved pension and health benefits in the

new contract.

WILL THE GOVERNMENT INTERVENE?

Prime Minister Justin Trudeau said on Friday the government

would not intervene and intended instead to pressure both sides

to avert a strike.

On Thursday, Air Canada ( ACDVF ) took the unusual step of saying the

federal government should be ready to step in to head off a

strike. While Ottawa has intervened several times in labor

disputes over the last few decades, it only did so after

stoppages have begun, not before.

Federal Labour Minister Steven MacKinnon has broad powers to

tackle disputes and last month intervened within 24 hours to end

a stoppage at the two largest rail companies, Canadian Pacific

Kansas City ( CP ) and Canadian National Railway ( CNI ).

That move was denounced by unions and criticized by the

federal New Democratic Party, which has helped keep Canada's

minority Liberal government in power through a deal offering

automatic support. Earlier this month NDP leader Jagmeet Singh

withdrew that support.

WHAT HAPPENS IF MY FLIGHT IS CANCELED?

If Air Canada ( ACDVF ) cancels a flight because of a strike by its

own employees, the airline must offer to rebook passengers free

of charge on the next available flight offered by any carrier,

or offer a refund and transportation to return passengers to

their point of origin.

Air Canada ( ACDVF ) has offered flexible travel waivers for

passengers scheduled to fly Sept. 15-23. The airline has said it

is also working with other carriers to secure seats for

customers to mitigate the impact of its flight cancellations.

However, it advised customers to accept refunds or future

travel credit as seats on other airlines are expected to be

limited.

Under Canada's airline passenger protection regulations,

customers will not be entitled to cash compensation for expenses

incurred as a result of delayed or canceled flights due to labor

disruption if they are flying within Canada. Passengers

traveling internationally may be entitled to compensation.

($1 = 1.3580 Canadian dollars)