Air Canada's unions firm on pensions

The Montreal Gazette -

Defined benefits sticking point; Airline says the plan's deficit is $2.1B, a figure that threatens company viability.

Three of Air Canada's main unions are open to negotiations on their pension plans, but not on changing them from a defined benefit scheme, they said jointly Monday.

The Canadian Auto Workers (CAW), the International Association of Machinists and Aerospace Workers (IAMAW) and the Canadian Union of Public Employees (CUPE) said in a joint statement that the Air Canada "defined plan is sustainable as long as (the airline) lives up to its legal and moral obligations to adequately fund the plan (complemented by employee contributions of course)."

In a telephone interview, CAW national president Ken Lewenza said that in talks before the June 13 deadline, the company has asked for "major concessions on pension plans."

But he conceded that Air Canada had not specifically asked to switch away from defined benefit plans to more uncertain defined contribution plans.

The company's pension fund deficit is roughly $2.1 billion, and the defined benefit system came to the fore recently in talks with the Air Canada Pilots Association.

ACPA's bargaining committee initially agreed to recommend to its 3,000 members that newly hired pilots should be steered toward less costly defined contribution plans. But a revolt by a majority of the pilots forced the union to rescind that recommendation - and ACPA back to the bargaining table.

The three unions that represent nearly 22,000 employees said they are "fully intent on maintaining the current pension model, although the exact details of the plan will be subject to negotiation."

In his annual assembly speech this month, Air Canada president Calin Rovinescu noted the "unsustainable" burden placed on the company's finances by 29,000 retirees at an airline that employs 26,000 people.

Air Canada spokesperson Isabelle Arthur added that the pension hole is "$600 million better than a year ago as a result of a strong fund performance in 2010. However, this deficit ... puts at risk both the viability of the company and the pensions of all employees."

The three unions said, though, that "pension plan deficits are largely a result of interest rates and market returns, (and) employees have assisted (Air Canada) in dealing with these deficits by agreeing to special pension regulations allowing (it) to defer deficit payments."

In the last decade, "Air Canada employees have endured wage cuts and wage freezes, the loss of benefits and paid time off ... ongoing deterioration in working conditions and stress levels ... (and) an erosion in the financial wellbeing of our pension plan - a plan to which the workers contribute through significant payroll deductions."

But Arthur said that last year, Air Canada "paid $180 million into its domestic registered pension plans and with the expiry last December of a moratorium on past service payments ... we are looking at $320 million in payments this year. To further illustrate the magnitude of the challenge, by 2014 Air Canada could be required to make $550 million of payments."

The unions said that "Air Canada's workers have been presented with offensive demands for dramatic, permanent reductions in pension benefits for existing employees."

But Arthur said that the airline has been discussing "a number of possible solutions" with unions to "preserve defined pension benefits for current employees."

The CAW represents 3,800 call-centre, customer services and ticketing agents.

IAMAW represents about 11,000 mechanics, baggage handlers and other staff; and CUPE represents 6,800 flight attendants.

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