Air Canada issued the following
clarification to set the record straight respecting pension plans following
statements made by third parties today at a Standing Committee on
Transportation (SCOT) hearing in Ottawa:
The company made it clear throughout its negotiations with its unions
that the best possible outcome to protect the interests of all employees -
including their pensions - would have been through a consensual process
outside a CCAA filing. This point was made repeatedly ever since the
discussions with the union leaders began on February 6, 2003.
The union leadership was well aware of the company`s concerns with
regards to the impact a CCAA filing could have on pensions where all economic
stakeholders have a say in what payments are made and what the final outcome
is to be.
In the discussions between several company executives and each of the
union leaders on March 31st and April 1st (just prior to the CCAA filing), the
company repeatedly and specifically raised concerns about the impact a CCAA
filing would have on employee pensions and sought to achieve the necessary
concessions to avoid the filing.
The value of Air Canada`s pension plans, like that of nearly all pension
funds, deteriorated in 2001 and 2002 due to a convergence of declining
interest rates and declining stock markets. As a result of this and coupled
with the fragile state of the airline industry, the Office of the
Superintendent of Financial Institutions (OSFI) requested that Air Canada
suspend the pension contribution holiday to which it is legally entitled and
conduct a pension valuation earlier than the next regularly scheduled
evaluation in 2004 to determine the extent of the pension shortfall and to
fund any liability as soon as possible. OSFI approached Air Canada on the
funding issues on February 6,2003 and had not previously raised any funding
concerns during 2002. This followed an article on pension underfunding
respecting many large Canadian corporations which appeared in a national
newspaper. OSFI then issued a direction to Air Canada on March 21,2003.
Discussions with OSFI continued until the CCAA filing earlier this week.