Retired employees of Air Canada support the government's decision to extend a cap on special payments to the airline's struggling pension fund, a spokesman for the retirees said on Wednesday.
Finance Minister Jim Flaherty announced the extension on the cap to January 2021 and a requirement that payments toward the deficit average $200 million a year for seven years, with a minimum of $150 million each year. In total, it will have to pay $1.4 billion over seven years.
The airline’s pension is currently facing a funding shortfall of $4.2 billion. Without the relief, media reports say the airline would have been required to pay $800 million into the fund in 2014. That would be a massive hit for an airline that recorded a $53 million profit in 2012, the first year it has been in the black since 2007.
"We do plan on supporting it," said Bruce Aubin, who heads the pension committee for Air Canada's retirees.
"I think it's reasonably fair. I think both Air Canada and the government did a good job in coming to a supportable agreement, and it should provide a period of stability and an opportunity for the current solvency deficiencies that exist in the plan to recover as hopefully the economy improves. And the problem at that stage may well go away."
The payments are above those Air Canada originally requested, and they come with a number of conditions. Reports say those conditions include a cap on executive pay increases (no more than the rate of inflation) and a prohibition on special bonuses. It will also be barred from paying dividends or buying back stock.
Analysts saw the news as positive for the airline. Cameron Doerksen of the National said if Air Canada had not received pension funding relief, its cash contributions post 2013 would have become unaffordable for the airline.
But not everyone was pleased with the news. WestJet said it was disappointed with the decision.
“We trust this marks the end of special treatment for Air Canada as such treatment as the expense of other industry players has become too common,” said Gregg Saretsky, WestJet’s chief executive, in a statement.— With files from Reuters