Airline Association Says Competition Hurt by Granting Air Canada Pension Relief

By Marowits, Ross | The Canadian Press, February 27, 2013 | Go to article overview

Airline Association Says Competition Hurt by Granting Air Canada Pension Relief


Marowits, Ross, The Canadian Press


Airline group opposes Air Canada relief

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Ottawa will create an unlevel playing field if it grants Air Canada's request for a decade of relief from the $4.2-billion deficit in its defined benefits pension fund, the Air Transport Association of Canada said Tuesday.

The group, which represents small regional carriers and training centres, said Ottawa should provide broad pension assistance to all Canadian companies, instead of giving a competitive advantage to the former Crown corporation.

"Rather than dealing with the problem with Air Canada's pension funds, deal with Canadian pension funds as a rule because if they (politicians) create this precedent, I can think of all the other industries that are going to line up at the PM's door and say: 'Me too,'" association president John McKenna said from Ottawa.

In a recent letter to Prime Minister Stephen Harper, McKenna said singling out a company that has already received "immense support" not forthcoming to its competitors would seriously impact the competitiveness of the airline industry.

Any relief should instead be short-term and based on annual approvals using established financial measurement tools, instead of locking in assistance over 10 years.

McKenna said it's hard to predict what financial shape the airline will be in over the next few years, adding that interest rates could rise and the airline's recent profits could accelerate as it expands its fleet and ramps up its new low-cost carrier.

The country's largest carrier wants Ottawa to put a $150-million cap on its annual solvency deficit payments for the next decade, starting in 2014. This would mean $700 million a year in relief in each of the first five years. The payments are in addition to its ongoing pension funding contributions that will total $1.5 billion between 2009 and 2013.

Air Canada (TSX:AC.B), which has been supported in its efforts by its unionized employees, declined to comment on the association's position.

The National Airlines Council of Canada, a group founded in 2008 to address issues affecting large carriers such as WestJet Airlines (TSX:WJA), Air Transat and Jazz, also declined to comment.

However, WestJet executives met with cabinet ministers last fall to oppose its rival's pension relief request, according the federal Register of Lobbyists.

WestJet said it did not want to specifically comment about the meetings.

"But at a general level, we are concerned about the impact on the state of competition caused by Air Canada repeatedly asking the federal government for financial assistance," said airline spokesman Robert Palmer in an email. …

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