CN Rail and the union representing locomotive engineers are in last-ditch negotiations, just hours ahead of a midnight Friday strike deadline.
The two sides began talks at noon in Montreal at the invitation of federal mediators.
Teamsters spokesman Stéphane Lacroix said he expected the talks would continue at least until late evening. He said there was a possibility the strike could be postponed if the railway agreed to negotiate and not impose a 1.5 per cent wage increase and revised mileage caps.
"Are they finding agreement on certain things? That is a possibility, but I wouldn't bet $50 on that either," said Lacroix, who had been unable to make contact with union negotiators.
A strike by 1,700 locomotive engineers could affect service, but analysts believe the railway can continue to operate since many of its supervisors and managers are qualified engineers.
CN invoked contractual changes three days after negotiations broke off Nov. 20 after 14 months of talks.
The Teamsters Canada Rail Conference then issued a 72-hour strike notice. It said the company was effectively locking out employees by unilaterally changing terms and conditions of the collective agreement.
Canada's largest railway company, also known as Canadian National, wants the dispute to go to binding arbitration if talks negotiations fail to reach an agreement.
The railway's last contract offer included a two per cent wage increase in each of 2009, 2010, 2011 and three per cent for 2012, along with standard benefit improvements. That was contingent on concluding a stable long-term agreement.
Via Rail said its passenger service will be unaffected if CN becomes involved in a strike.
Service in jeopardy
In the Montreal region, the Metropolitan Transport Agency (AMT) said a strike would force the cancellation of service on its Montreal / Deux-Montagnes and Montreal / Mont-Saint-Hilaire train lines.
In a statement, the AMT said it was seeking a court injunction to block a strike by CN engineers calling it "unacceptable" that service for 38,000 commuters a day could be "held hostage" by a labour conflict.
In case of a strike, the agency said, it will try to arrange for shuttle service for commuters starting Monday.
The most recent strike at CN ended after more than two months in 2007 when Parliament enacted back-to-work legislation affecting 2,800 conductors represented by the United Transportation Union.
The railway estimated that strike cost it $50 million in operating income and $35 million in net income.
On the Toronto Stock Exchange, CN's shares gained 58 cents to $55.58 in Friday trading.