June 28, 2012 / 4:24 PM / 6 years ago

Ottawa has had pension-deficit talks with Air Canada

GALWAY, Ireland (Reuters) - The Canadian government has had discussions with Air Canada on extending a moratorium on the airline making payments to erase its huge pension deficit and the issue needs to be resolved over the next couple of years, Finance Minister Jim Flaherty said on Thursday.

The current moratorium expires in January 2014, but the estimated deficit doubled during 2011 to C$4.4 billion ($4.3 billion) at the start of 2012, and there is now discussion about extending the moratorium to 2024.

“The pension liabilities are enormous so it’s a challenge for the airline,” Minister Jim Flaherty told a news conference in Ireland when asked if Air Canada, the country’s biggest airline, was in such bad shape that it would fail without a moratorium on its pension payments.

“Over the course of the next couple of years there needs to be a resolution of the pension issues,” he said.

Flaherty said the government would monitor negotiations going on now between the airline and some of its unions.

Its biggest union, representing mechanics and baggage handlers, issued a news release last week supporting the company and asking the government to extend pension plan relief until 2024. In return, the airline agreed to remove a 3 percent benefit reduction.

Flaherty also said a solution would require the approval of the Superintendent of Financial Institutions Julie Dickson and retired pensioners.

Air Canada spokesman Peter Fitzpatrick said last week that the company was looking at various strategies to manage potential pension-deficit payments beyond January 2014.

Reporting by Padraic Halpin; Additional reporting by Randall Palmer in Ottawa; Editing by Peter Galloway

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