If we won't let an insolvent company go bankrupt let's at least put an end to the unfairness of Canadians having to support fund generous gold-plated pensions on their tax dollars
HAMILTON: Airline for sale: Market value: $280 million; Annual operating loss: $249 million; pension liability: $4 billion. Any takers?
The Air Canada deal has been mediated with another employee group after 14 months of negotiations. Once again rather than real solutions to its pension problem the issue has been kicked down the road and the “solution” is now dependent upon the suspension of pension payments for another 10 years and an expectation of spectacular investment returns.
If that fails taxpayers can bail out the plans.
In 2009 special regulations were created by the federal government to give special exemptions to Air Canada for funding its pension plan. The plan allowed for extended pension contribution holidays along with promises for future funding. Only three years later we are back at the same scenario.
Once again, the airline will not have to face up to its significant pension funding shortfalls - yet. The government has allowed it to postpone required contributions that would make the pension sustainable - largely because solving the pension deficit would make the company insolvent.
From 2004 to 2009 the company refueled the plan with an extra $1.7 billion over and above regular annual contributions totaling in the billions. Despite these payments by 2009 it was short $2.9 billion and now Moody's estimates that the plan is short $4 billion or worse.
The unfortunate reality is that Air Canada is a pension fund trying to run an airline for the benefit of its employees. At the end of 2011 the pension fund had assets of about $11 billion. Currently it is short $4 billion before the returns in the plan from 2012 are reported and they could be quite disastrous, increasing the shortfall. Last year the company had an after tax operating loss of $249 million. The stock markets put the total value of the company at only $280 million.
The proposed solutions for Air Canada seem to be window dressing.
This contrasts with the reality for major companies in the Canadian economy that have had to face pension problems head on and solve them once and for all or face bankruptcy. The most recent examples have been GM with about 8,000 Canadian workers and ArcelorMittal Dofasco, with 12,000 workers and retirees. They both completely eliminated all defined benefit plans for current and future employees.
The only real solutions is eliminating the taxpayers support defined benefit pension plan. If we won't let an insolvent company go bankrupt let's at least put an end to the unfairness of Canadians having to support fund generous gold-plated pensions on their tax dollars.
Meanwhile, I am thinking of asking the Finance Minister to provide special regulations in Parliament to bailout my flagging RRSP. What do you think of my chances?
Bill Tufts, Fair Pensions For All, founded in January 2009, our goal is to promote an honest and fair analysis of our pension system; to expose abuse and waste within the system; to develops and promote new ideas and concepts on pensions based on fairness for all.
We maintain that it is every Canadian’s right to receive sufficient income in retirement to afford an acceptable quality of life.
