UPDATE 4-Air Canada wins extension on cap on special pension payments

Tue Mar 12, 2013 8:56pm EDT
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* C$150 mln a year required, and C$1.4 bln over 7 years

* It had sought just C$150 mln/year, over 10 years

* Subject to compensation, dividend restrictions

* Defined benefit plans had big gaps as interest rates fell

* Rival West Jet had opposed "special" help to Air Canada

By Randall Palmer

OTTAWA, March 12 (Reuters) - Air Canada won a seven-year extension on Tuesday of the cap on special payments to erase its sizeable pension fund deficit, over the objection of its smaller rivals, but will have to make higher payments than it originally requested and abide by certain conditions.

Finance Minister Jim Flaherty said the airline, which had sought to limit its special payments to C$150 million ($145.6 million) a year for 10 years, will have to pay a total of C$1.4 billion over seven years, or an average of C$200 million a year, with a minimum of C$150 million a year.

"It's important to note that Air Canada's unions and retirees have been supportive of the company's request for further solvency funding relief for its pension plans," Flaherty said. "This regulatory change ... is providing Air Canada time to pay off the sizeable pension deficit."   Continued...