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Air Canada Gets Pension Agreement

Canadian Press Globe and mail.com

March 31, 2004

Air Canada and its largest union have settled a disagreement over pensions that threatened to derail the airline's restructuring.

The deal announced Wednesday with the International Association of Machinists and Aerospace Workers shattered a united front the airline's unions had presented in opposition to any changes to their pension plans.

"This agreement provides all our members with the right to choose the pension program that's best for them according to their personal circumstances," said Jean Jallet, national president of district lodge 140 of the IAMAW.

"There are no losers. I believe our members will view this as the best option to ultimately secure their employment by ensuring Air Canada emerges from CCAA with the support of a strong investor."

Air Canada - under court protection since last April 1 under the Companies' Creditors Arrangement Act - will give current members of the Machinists union a choice between staying in a defined-benefit plan and switching to a defined-contribution plan. New employees will receive a defined-contribution plan.

Current employees who opt for the defined-contribution plan will receive a bonus of 10 per cent of base salary.

Trinity Time Investments, the proposed new controlling shareholder in Air Canada, has insisted on pension changes to shift future financial risk away from the company to the employees.

The agreement with the Machinists - representing 11,500 technical operations, ground service, clerical and financial personnel - is the same deal Trinity presented earlier to non-union employees.

Headed by Hong Kong businessman Victor Li, Trinity had threatened to walk away with its $650-million investment if the pension changes were not made.

"Today's announcement represents a very significant step in ensuring Air Canada emerges from CCAA a stronger airline, thereby securing jobs for their membership," said Robert Milton, president and chief executive.

"I would urge all Air Canada's unions to put an end to the uncertainty facing our employees by negotiating similar agreements to facilitate the changes to Air Canada's pension program design."

The agreement comes as the airline's board of directors reviews the airline's updated business plan and 2003 financial statements in which Air Canada is expected to report a massive loss.

Air Canada was forced to revise its business plan in the face of higher fuel costs, increased domestic competition from WestJet and Jetsgo, and smaller than expected savings from agreements negotiated with its unions last year.

Under its current agreement with Trinity and GE Capital Aviation Services, which is to provide $1.5-billion US in financing and restructure leases on 108 aircraft, Air Canada must emerge from creditor protection by the end of April.

The court overseeing Air Canada's restructuring extended the airline's creditor protection earlier this week until April 15 by which time Trinity is expected to decide whether to proceed with its investment and on what terms.

GE Capital, meanwhile, has said the airline marketplace has improved and the lesser may not have difficulty finding new customers for planes it leases to Air Canada. 


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