Air Canada seeks C$150 mln special pensions cap, letter shows

Thu Nov 15, 2012 2:01pm EST
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* CEO reveals the amount in letter to finance minister

* Letter obtained under access-to-information law

* Rovinescu says deficit not sustainable if rates stay low

* Cap would extend through 2023 as long as fund is in red

OTTAWA, Nov 15 (Reuters) - Air Canada wants to cap special payments toward its pension fund deficit at C$150 million ($150 million) a year for the next decade, a letter from Chief Executive Calin Rovinescu to Finance Minister Jim Flaherty shows.

The April 26 letter, received by Reuters on Thursday under access-to-information legislation, formally requested a cap of that amount from 2014 through 2023, as long as the pension fund remained in deficit.

Air Canada has already won approval from its labor unions and its pensioners for a cap, but as recently as Nov. 8, Rovinescu declined in a conference call with analysts to confirm that the amount of the cap he was seeking was C$150 million.

Rovinescu said the C$2.2 billion increase in Air Canada's pension deficit during 2011 was the result of a reduction in the discount rate used to calculate pension liabilities, to 3.3 percent from 4.5 percent.

"This is not sustainable in the current context, assuming no material increase in interest rates," Rovinescu wrote to Flaherty.   Continued...