Air Canada may be nearer pension deal despite tough Ottawa line

Tue Aug 7, 2012 4:13pm EDT
 
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By Randall Palmer and Louise Egan

OTTAWA (Reuters) - Air Canada has won key union support for its bid for more relief on payments to erase its pension fund deficit, pressuring the Canadian government to agree even though Ottawa recently rejected similar requests from other companies.

The pension deficit of the country's largest airline doubled to C$4.4 billion ($4.4 billion) during 2011, primarily because of unusually low interest rates rather than any sudden demand on assets. Unions recognize the danger that such a big shortfall presents for Air Canada even though the deficit has subsequently dropped by C$1.1 billion due to recent labor contracts.

"In this extraordinary circumstance, we don't want to do something that pushes the airline over the brink," Paul Moist, president of the Canadian Union of Public Employees, which represents Air Canada's flight attendants, said on Tuesday.

In 2009, Air Canada won agreement from the government to allow it a moratorium on making any special payments to reduce its pension deficit through 2010, and then a cap on special payments that would rise from C$150 million in 2011 to C$225 million in 2013.

The company is now seeking to extend that cap until 2024, and labor arbitrators have ruled that without such relief "grave existential questions" would arise about the future of the airline and its pensions.

Moist was one of several union leaders who met Finance Minister Jim Flaherty on July 23 at Flaherty's request to discuss Air Canada's pension situation.

Flaherty had told reporters a month earlier that the most important condition that must be met for the government to agree to any extension would be that all parties -- company management, current union members, pensioners and the country's financial regulator, Julie Dickson -- also agree.

Flaherty's position is delicate because in June he told a group of six big corporations -- including BCE Inc's Bell Canada and Canada's two national railroads -- that he was not prepared to enact special measures to give them more time to pay down their pension deficits.   Continued...