Air Canada Pension

[Sidd]

Just wondering if someone would be able to explain how the Air Canada pension works. What does it mean when I read that AC is asking the federal government for an extension of pension fund relief (http://www.theglobeandmail.com/report-o ... le4332799/). Does that mean that AC just doesn't have to pay into the pension for a couple of years? Do they owe the pension money later? Will the federal government contribute to the pension instead (kind of a bail out)?

Is the pension backed by the government? If AC's market value is $280 million and the pension is in deficit of $4 billion, where would that money for the pension come from? (http://www.troymedia.com/blog/2012/06/2 ... n-airline/) Are there other assets that the pension fund is invested in? In the extremely unlikely even that AC would go under, or part of AC, are the pensions safe?

Thanks for your time.

[flatface]

Deleted

[ogopogo]

It's astounding that the market value of AC is only $280M. The entire company can be had for the same price as a B-787 plus a few spare parts.

[Sidd]

Thanks very much flatface. All clear now.

[conehead]

There is a 4th group; members of "The Executive Pension Plan". This plan is fully funded, and members will receive 100% of their benefits.

[whipline]

Conehead are you kidding? Management has kept their pension fully funded while not topping up the employees?

[bcflyer]

Nope Conehead is not joking. To add insult to injury not only is their pension fully funded, (with a much larger benefit than other employees will enjoy) but they also earn said benefit after a very short term of employment. (unlike the rest of us who must work about 30yrs for a full pension)

Is it any wonder that the employees have had enough??

[Rockie]

Nope Conehead is not joking. To add insult to injury not only is their pension fully funded, (with a much larger benefit than other employees will enjoy) but they also earn said benefit after a very short term of employment. (unlike the rest of us who must work about 30yrs for a full pension)

Is it any wonder that the employees have had enough??

I believe their pension is still indexed too if I'm not mistaken. That's so they don't lose buying power for the pension they earned in a few short years for destroying a company.

But then again look who they have to emulate. Harper, Flaherty and bunch are systematically stripping federal workers of their pensions, increasing the age at which all Canadians can receive OAS, and facilitating the elimination of private pension plans for millions more Canadians. BUT, they aren't reducing their obscene pensions even a tiny bit.

[whipline]

Wow. Just this fact alone would make me want to tell them to fcuk off. How can they fund their pensions with a straight face? How can one lead when they don't give a crap about the people their trying to lead?

[bcflyer]

Thats the point. They aren't leaders in any way, shape or form. They are here to extract as much money as they can from AC, tranfer it to their bank accounts and move on to the next unfortunate company.

[Takeoff OK]

Thats the point. They aren't leaders in any way, shape or form. They are here to extract as much money as they can from AC, tranfer it to their bank accounts and move on to the next unfortunate company.

DING DING DING DING DING DING DING!!!!!!!!!!!

[Bored]

And They have just siphoned off the full amount of pension owing to the employees who went to Aeroplan. Wasn't there a deficit when they left? Yet Aeroplan has to pay none of the deficit. Just more spinning money out of Air Canada to the favoured companies.

[cgzro]

If you want to see what can happen just look at Nortel.
Massive hit to pension funds with no govt help.
I think it ended up about 65% of full value.
Those that got out early got 89% lump sum equivalents infact people laid off very early did very well compared to others including large severence packages etc.

Lesson from that. If its going under get out and take a lump sum and severance.
Take the severance as cash even at reduced amount as severence paid out regularly stopped at bankruptcy date. Basically take cash asap.

My two cents from that experience.

[Doug Moore]

There is a 4th group; members of "The Executive Pension Plan".

Bet you didn't know that theirs is a "non-contributory" pension plan. Not only do these boys enjoy a sweet salary with bonus, but they apparently don't pay a single penny towards their even sweeter pension plan - which by the way, is based on their best 36 months as opposed to you worker bees' 60 months Final Average Earnings. If you really want to set your hair on fire, you can read all about it here: http://www.aircanada.com/en/about/inves ... _proxy.pdf

The pension info starts at the bottom of page 71. You might note with interest that the passing of April 2012 was no doubt celebrated by one executive who used to be a pilot. Read it and weep.

[Lakelad]

.

Air Canada’s retirement fund is in for a bumpy ride


Monday, Jul. 02 2012 - Globe and Mail
Barry McKenna

“Welcome aboard Pension Air Flight 163, bound for Vancouver. Please ensure your seat belt is securely fastened, your bags safely stored under the seat in front of you and your seat back is in the full, upright and locked position.”

Pension Air, a.k.a. Air Canada, has become a flying retirement fund, where a shrinking workforce toils for a much larger generation of retirees.

The company’s pension solvency deficit ballooned in the past year to $4.4-billion, from $2.2-billion – a bad situation made worse by today’s low interest rate environment. If the Montreal-based airline’s defined pension plans were wound up today, Air Canada would be billions short of meeting its obligations to current and future pensioners.

And, unfortunately, it’s not at all clear when, or if, the airline will meet its commitment to workers. The airline hasn’t turned a profit since 2007, and with more retirees than employees (29,000 versus 26,000), the deficit is a millstone that grows heavier every year. Something has to give.

Federal Finance Minister Jim Flaherty confirmed last week that he’s in talks with Air Canada about extending a moratorium on the money it is legally bound to put into its pension plans in 2014 and beyond. It would mark the second time in three years the airline makes such a request.

Without some slack, Air Canada would face a rapidly growing annual pension bill, including upward of half a billion dollars in 2014.

Air Canada will no doubt argue that its problems are transitory – that it will eventually be in a position to fill the yawning pension hole by reducing employee costs, in part by giving new hires less generous pensions.
Even then, pension stability is likely more than a decade off for Pension Air. Federal arbitrator Michel Picher warned bluntly last month that Air Canada is facing “grave existential questions” and must choose between pension solvency and corporate solvency.

'Westjet and Porter – that aren’t saddled with this heavy pension and demographic baggage.'

.

[MackTheKnife]

Air Canada's pension woes are just another glaring example of total incompetence at the top of the dung pile. As per usual the rank and file employee will take the shit kicking for their mistakes.

Google the OMERS pension fund and check out the returns from a professionally managed portfolio.

Their average annual return over the past 3 years has been an unbelievable 8.61%. Over the past 10 years 6.43%. Meanwhile the AC pensions finds are drowning in red ink.


MTK

[YYZSaabGuy]

The Globe & Mail article went on to point out: "Air Canada’s predicament highlights a deepening national pension crisis. A recent survey by AON PLC found that 97 per cent of Canadian defined-benefit pension plans have solvency deficits. On average, those plans’ assets covered only 69 per cent of liabilities – meaning they would be able to pay out less than 70 cents on the dollar."

Not to defend Air Canada management in any way, shape or form, but from a pension perspective, they're in good company if 97% of Canadian DB plans are under water. Crappy equity market returns over the last 5+ years and low interest rates have made it tough for pretty much all pension fund managers.

[fish4life]

The days of DB pensions are over and honestly that's quite understandable, typically a company gets double hammered during an economic downturn in that the passenger traffic and revenue's go down while at the same time the investment side of the pension plan can get hit with negative returns. Personally I'd much rather have a DC pension with a much greater company matching eg 10-15% at least that way its my money and up to me to save enough to retire.

[altiplano]

The days of DB pensions are over

Except for the C-suite executives and members of government.

It's hypocrisy that these are the people who are pushing for the end of DB pensions for rank and file long term employees while sitting on their own non-contributory pensions earned after only a few years service.

I'm not specifically speaking of this issue as it relates to Air Canada. If DB pensions aren't sustainable they should be pulled starting from the top and the people who want to pull them. CEOs, Government Ministers, etc.

Don't preach austerity to the people if you don't practice it.

[CanadianEh]

Well said Altiplano

[altiplano]

Here is where we should start with the pulling of pensions...

... “She’d become a figure of ridicule because people were justifiably angry at how she’s spent money.”

Ms. Oda’s departure as minister at the end of July sets the stage for a possible early August cabinet shuffle. Because she’s served more than six years as an MP and is over 55, Ms. Oda immediately qualifies to receive an MP's pension after she leaves.

The Canadian Taxpayers Federation, a fiscally conservative lobby group, estimates that Ms. Oda’s annual parliamentary pension will start at $52,183, cumulatively reaching $701,464 in payouts (over the next 11 years).

“Bev Oda’s lifetime pension should cover about 43, 841 glasses of $16 orange juice,” CTF National Research Director Derek Fildebrandt said.

http://www.theglobeandmail.com/news/pol ... le4386157/

[flatface]

Deleted

[TheStig]

Flatface, good post.

[homer85]

Calin's view on Pension deficit at AC....

http://www.youtube.com/watch?v=CLzIzbq2 ... =endscreen


Outdated... will be interesting what will happen now.