Travellers flying Air Canada can keep booking their flights as negotiations continue with a new federally appointed mediator to help resolve an ongoing contract dispute between the airline and its pilots.

"It is business as usual," the Montreal carrier's spokesman Peter Fitzpatrick said in an email Tuesday.

"Customers can continue to make their travel plans and book in confidence."

Talks are continuing and "we are confident that a disruption will be avoided," Fitzpatrick said.

Strike mandate

Later Tuesday, the pilots gave their union an overwhelming mandate to call a strike. The union said 97 per cent of the 3,000 Air Canada pilots it represents voted in favour of a strike if necessary to press their contract demands.

"The corporation must now recognize the resolve of Air Canada pilots and come to the bargaining table with a renewed commitment to negotiations in good faith," said Capt. Paul Strachan, president of the Air Canada Pilots Association.

Air Canada is already in a legal position to impose new contract terms or lock out the workers. The measures give either side 72 hours to serve notice of its intention to impose a work stoppage.

Both sides have said they will not use those options while talks continue.

Air Canada has had difficult labour relations in recent years as the company tried to control costs in order to cope with rising fuel bills and the impact of a sluggish North American economy.

However, the federal government put pressure on both sides to avoid any disruptions in air travel, saying a strike or lockout would harm the economy during a fragile recovery.

On Tuesday, federal Labour Minister Lisa Raitt intervened in the pilots' dispute, initiating a six-month mediation process after telling both sides any work stoppage would harm the interest of Canadians.

Raitt met with representatives of the airline and the Air Canada Pilots Association on Monday, telling them that the government has been "closely following" the so-far failed negotiations between the two sides.

"We believe that a work stoppage at Air Canada is contrary to the best interest of hard-working Canadians, Canadian businesses and the already fragile economy," Raitt said in a news release Tuesday, announcing the new mediation process.

Labour Minister Lisa Raitt on Tuesday initiated a six-month mediation process between Air Canada and its pilots union. (Fred Chartrand/Canadian Press)

An earlier, two-month effort by a representative of the Federal Mediation and Conciliation Service (FMCS) has so far been unable to bring the two sides together.

Raitt said she wants to "encourage" both sides to reach a deal.

"I will continue to do everything within my power to encourage an agreement between the parties, one that protects the interests of the pilots, Air Canada and the travelling public," the minister said in the release.

"The government believes in the principles of free collective bargaining and has made the resources of the FMCS available to both parties in an effort to help reach a negotiated agreement. That is why we have offered the parties a new mediator and a six-month process to assist them in settling this dispute."

Could be ordered back to work

University of Toronto professor Joseph D'Cruz said Raitt could end up ordering the pilots back to work in the event of a strike or lockout.

"Mediation is only helpful when both parties are eager to compromise in order to reach a settlement, and I don't see that to be the case," said D'Cruz who teaches strategic management at the Rotman School of Management.

"So, I think, eventually it will come down to a failed mediation and then the minister will come in and order them to continue working," D'Cruz said. "She has postponed that for six months."

Section 105 of the Canada Labour Code grants the minister the right to appoint mediators to confer with parties in a labour dispute and to help them reach an agreement.

The government's past actions to prevent or limit strikes by Air Canada's customers service agents and flight attendants had suggested it wouldn't tolerate any disruptions by pilots.

The new developments in the pilot dispute come after the airline reached a tentative agreement last week with its 8,600 mechanics, baggage handlers, and cargo agents -- the carrier's biggest union.

Low-cost carrier

D'Cruz said a major sticking point for the pilots is Air Canada's intention to launch a low-cost international carrier, which would mean lower salaries for those pilots.

"So what the pilots are facing is a situation where going into the future the number of pilots required within Air Canada will go down, while the number of pilots required in the low-cost airline will go up."

D'Cruz cited Australia's Qantas as an example of an airline that has successfully set up low-cost airlines by tapping into cheaper labour pools in countries like Singapore to offer international flights.

Air Canada has faced rising competition in the domestic market, mainly from rivals WestJet Airlines, which plans to start up a regional carrier in Canada, and from Porter Airlines.

Air Canada CEO Calin Rovinescu told analysts last week that the airline still hopes to conclude a negotiated settlement.

In its latest financial report last week, Air Canada said it lost $60 million in the fourth quarter of 2011 and $249 million for the year.

With files from CBC News