Canada: Airline, unions hash out pensions

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Canada: Airline, Unions Hash Out Pensions

By SUSAN PIGG, Toronto Star

July 8, 2003

Canada - Air Canada and its unions meet tomorrow amid concerns the airline's pension deficit continues to climb out of control and could threaten the viability of concessions packages already ratified by its nine unions.

Ottawa's pension watchdog, the Office of the Superintendent of Financial Institutions, or OSFI, recently warned Air Canada's pension deficit has grown by as much as $500 million since January to a possible $1.8 billion, and expressed "concern" in a letter to the insolvent airline "over the lack of progress made in addressing the under-funding of the Air Canada pension plans."

The disclosure, less than three weeks after Air Canada management told some union officials the pension shortfall had actually declined by $500 million since March, has some union leaders concerned Air Canada will try, yet again, to wrestle pension concessions from employees.

"The deal that we have made with Air Canada (for more than $1 billion in job cuts and concessions from its 40,000 employees) is going to rise or fall on that pension issue," said Pam Sachs, who represents Air Canada flight attendants with the Canadian Union of Public Employees. "All of our members feel that way."

The only reason Air Canada was able to get $1.1 billion in concessions from its unions, and quickly, is because Mr. Justice Warren Winkler, who was appointed by the bankruptcy court to oversee the critical talks with management, made it clear that pensions wouldn't be touched, said Sachs.

In exchange, the unions agreed that they would back Air Canada's request to the OSFI for up to 10 years to make up the shortfall.

Air Canada has been taking so-called contribution holidays — not making employee contributions to its pension plans — for months, despite warnings from OSFI that the airline's pensions have been in deficit since last year, partly because of a drop in the stock markets.

"If Judge Winkler had not interceded on that pension issue, there would not have been a deal,'' Sachs said. ``Every ratification is conditional (on the pension issue.) Would the unions withdraw (from concessions agreements)? Yeah."

"Everyone was pretty serious about it in April and May," said Sachs.

"And nothing has changed since then."

Air Canada declined to discuss the substance of tomorrow's meeting in Montreal, other than to point to a recent Air Canada letter — made public last week as part of bankruptcy court filings — replying to concerns expressed by the OSFI.

"We entirely agree with you that it is important to initiate substantive discussions between all of the relevant parties with regard to the funding issues surrounding the pension plans as soon as possible. Air Canada is fully aware of its responsibilities as administrator and sponsoring employer in this respect," says the June 23 letter from Air Canada lawyer John Baker.

Baker notes the airline planned to await final ratification of the concessions by all its unions, which took place on June 30, before convening a meeting with union leaders to discuss pension issues.

"It would then be our intention to schedule a meeting amongst representatives of Air Canada, each of these parties, and OSFI at everyone's earliest convenience in July, so as to settle on an action plan to address the various issues related to the pension plans, including in particular their funding," Baker said.