Union urges AC bailout

[Kip Powick]

The union representing about 4,500 ticket agents and call-centre workers at Air Canada is urging Ottawa to bail out the country's largest airline and backstop employee pension plans.

Ken Lewenza, the head of the Canadian Auto Workers union, said yesterday that the federal government should take a stake in the country's largest airline as it grapples with an economic downturn that has sapped demand for air travel and wreaked havoc with employee pension plans.

He said that the move would go a long way toward protecting Air Canada and its employees from a cyclical industry that often appears to be lurching from one crisis to the next.

"Air Canada's privatization has been a disaster," said Lewenza, adding that recent investments by Ottawa in the auto sector demonstrate that the federal Conservative government may be open to the idea.

The request was part of a five-point plan proposed by the CAW that also included stopping the wind-up of Air Canada parent ACE Aviation Holding's Inc., setting capacity limits on the Canadian airline sector in a bid to reduce unprofitable flying and block any further payments to former Air Canada CEO Robert Milton, whom the union accuses of "stripping and selling off Air Canada's profitable units leaving the core business to flounder."

Milton, now the CEO of ACE, has defended the move by arguing that the decision to spin off loyalty program Aeroplan in particular freed a valuable business from being dragged down by a notoriously difficult industry.

He has noted that Aeroplan's market valuation is now higher than that of some major U.S. airlines.

But many employees remain bitter after agreeing to more than $1 billion in concessions during Air Canada's restructuring only to watch billions worth of payouts to ACE shareholders following the divestiture of the business units.

Air Canada is preparing for what's expected to be a difficult round of labour negotiations over the next few months with its five unions, whose members will have the option of striking for the first time since the airline emerged from its court-protected restructuring in 2004.

A key issue on the table is the funding of Air Canada's various employee pension plans.

Air Canada estimates deficits in its various employee pension plans total $3.2 billion, with some analysts estimating the airline will need roughly $475 million over the next year just to fund the deficit.

Air Canada, which has sought changes from Ottawa on pension funding rules, said in a statement yesterday it was committed to retaining its employees' defined-benefit pension plans and it is seeking support from its unions for a moratorium "and other conditions" on funding the pension deficit.

The CAW, on the other hand, wants the federal government to require Air Canada to fully fund its pension obligations and set up a federal pension-benefit guarantee fund to backstop pensions of troubled companies.

Leslie Dias, the president of CAW Local 2002, said the union is concerned that Air Canada is privately seeking to move employees away from defined-benefit plans, which guarantee a certain level of benefits once employees retire.

She said in previous negotiations the airline has voiced interest in defined-contribution plans, which only require employers to pay a set amount into the plan

[DEFCON]

"She said in previous negotiations the airline has voiced interest in defined-contribution plans, which only require employers to pay a set amount into the plan"

I know it's not popular with a lot of people, but isn't it time?

Think of the advantage to the employer, they can predict their costs going foward. We on the other hand, must take responsibility for our own lives and futures rather than seeking someone elses unreliable future guarantee to provide for us.

[AIP]

Lewenza is an idiot.

A friend of the NDP perhaps ??

Something right of their playbook.

What a joke.

Even more reason our group should get as far away from the others as possible.

[FA@AC]

Even more reason our group should get as far away from the others as possible.

No arguments here about the idiocy of the CAW's position, but what brilliant proposals for the way forward should we expect to hear from ACPA?

[Seeker]

No arguments here about the idiocy of the CAW's position, but what brilliant proposals for the way forward should we expect to hear from ACPA?

You should expect nothing since ACPA has decided that it's unseemly and unprofessional to discuss these things via the press. Much work being done behind the scenes however.

[dagger]

You should expect nothing since ACPA has decided that it's unseemly and unprofessional to discuss these things via the press. Much work being done behind the scenes however.

Well I guess there is no common front because the other three unions seem to have no hesitation about making their views public.

[FA@AC]

You should expect nothing since ACPA has decided that it's unseemly and unprofessional to discuss these things via the press.

Oh. That's new. There was a time when ACPA had no hesitation about whining in the press about how underpaid its members were. I also remember a lot of press coverage of a stupid--and probably racist--remark proudly made by an esteemed ACPA executive when Victor Li was in the picture. Better leadership now, I guess.

[Seeker]

Well I guess there is no common front because the other three unions seem to have no hesitation about making their views public.

Well I didn't say there wasn't a common front - maybe there is, maybe there isn't. ACPA has decided however not to fight it out in the press every second day.

[AIP]

No arguments here about the idiocy of the CAW's position, but what brilliant proposals for the way forward should we expect to hear from ACPA?

ACPA waiting for CUPE to have its turn in front of the microphone.

Almost as bad as the CAW.

Pilots pension is in by far the best shape of them all. A sound and reasoned approach to help get through this will suffice. It does not need to be played out in the media, and certainly we know better than to look for public support.

That is a complete waste of time, energy, and resources.

[FA@AC]

ACPA waiting for CUPE to have its turn in front of the microphone.

Almost as bad as the CAW.

I think you might be a bit confused about what has so far been said by whom. CUPE's public statements on the pension matter and on negotiations in general have so far been responsible in my opinion. There hasn't been any CAW-style howling or crying about how hard done by the members are--just statements to the effect that "we know our customers are counting on us" (i.e. we don't intend to do anything to put AC's viability at risk) kind of stuff. Before we have seen the end of this, I won't be surprised if we have heard dumb things said in the media by reps of all the unions at AC, including CUPE and ACPA. So far, so good from both, though.

I took it from your remark about how your group should distance itself from all the others that ACPA was above pulling any nonsense whatsoever, and that its leadership was brilliant while the rest of us were represented by dorks. The only firm proposal on how things ought to be handled that has so far been voiced by an ACPA member on this forum was that his union ought to refuse to budge 1mm to compromise on pensions or anything else, and that if doing that ends up forcing AC into liquidation he'll prosper as a result of AC's shutdown. That take on things rivals Ken Lewenza's on the out-to-lunch scale IMO.

[AIP]

You should know by now opinions expressed on this or any forum by me or any other ACPA member are just that.

My reference to CUPE was from the past and the now former spokeswoman you had.

[FA@AC]

My reference to CUPE was from the past and the now former spokeswoman you had.

Fair enough, but you might want to remember that a former (at least we should all hope) ACPA mouthpiece made the national press when he told Victor Li that he should put his money on the slow boat back to China. He was quite proud of what he considered to have been a very witty remark, and he was happy to repeat it loudly enough to be heard throughout the J-class cabin on a flight I worked when he decided to give the operating crew and some deadheading staff an update on how CCAA negotiations were unfolding. Both his conduct and what he said represented his membership poorly, so you might want to refrain from making condescending remarks about other employee groups such as the one about how your group "ought to get as far away as possible" from all of the others. Your representatives have made just as many idiotic utterings as the representatives of all the other unions at AC.

[Fido]

Pilots pension is in by far the best shape of them all.

I think that you will find that ALL of the pension plans for ALL groups are in surplus, as long as the company keeps operating.

It is only the 'specious' (how's that Dagger?) calculation that shows a deficit.

[IFG]

.... Pilots pension is in by far the best shape of them all ....

This has been stated on a few threads. Couple of questions.

Is there a published valuation or audit to support that contention? If any DB pension scheme is at all close to being fully funded right now (under current specious conditions ), they're certainly sitting on a massive collection of assets.

And IAC, are the various employee groups' pension funds segregated at AC? I understand that the outside, "Top Hat" part for the pilots is paid out of general revenues (i.e. there's no 'fund' to be in surplus or deficit?), but is the registered and regulated portion not funded from the same pot as everybody else's?

Cheers, IFG

[Homerun]

IFG, the assets in the pilots plan are co-mingled for investment purposes but held it a separate trust.

There are 2 pension calculations. 1 is on a going concern basis and under this scenario the plans are fine. The 2nd is the solvency calculation. ie, if AC shuts down tomorrow. This is the calculation that has a large deficit, a deficit solely due to interst rates being at a historic low.

[IFG]

Thanks, Homerun - are the separate trusts separately evaluated? If so, how would the sum of assets be allocated, i.e. how could one group be in any better 'position' than the others?

I do understand the calculations (and have participated in a partial wind-up); I try to apply a similar exercise on my own DC & savings planning. Results are sobering, and I think if that practice was more widespread, there'd be a lot less prattle on here about pension 'losses', and averred preference for self-managed DC. As you clearly also understand, the range of considerations is far broader than simple asset values.

Cheers, IFG