* CAW says had little choice but to back request
* Air Canada pension deficit was C$4.2 bln on Jan. 1
* Finance Minister said pension request needed union backing
* Air Canada asking to limit payments to C$150 mln/year -CAW
Oct 25 The Canadian Auto Workers union said on
Thursday it would back Air Canada's request to the
Canadian government for further relief on funding its deep
pension deficit, becoming the final union at the airline to give
its blessing to the proposal.
Bob Orr, assistant to national CAW President Ken Lewenza,
said the union had little choice but to support money-losing Air
Canada's request to extend a cap on its past service pension
payments for another 10 years from 2014.
"With the pension payment being due in 2014, no one is under
the illusion that Air Canada would have the money to make that
payment," Orr said in an interview.
"We didn't want to get into a whole round of discussions
around other cost-savings measures they would need in order to
make the payment," he said.
Air Canada's pension deficit stood at C$4.2 billion ($4.23
billion) as of Jan. 1, largely because of extraordinarily low
interest rates, and analysts say funding the plan under normal
rules could threaten the airline's existence.
Finance Minister Jim Flaherty has said he would only
consider granting the extension if the airline, Canada's
largest, had the support of current unionized workers and
pensioners - representing 27,000 employees and 25,000 retirees.
He also wants Canada's financial regulator, the Office of
the Superintendent for Financial Institutions, to agree to the
extension although OSFI has no formal regulatory power in the
funding relief decision.
In 2009, Air Canada won agreement from the government for a
moratorium on making any special payments to reduce its
defined-benefit pension deficit through 2010, and then a cap on
special payments that would rise from C$150 million in 2011 to
C$225 million in 2013.
Orr said Air Canada was approaching OSFI to "pay C$150
million into the plan" each year until 2024.
Air Canada said in an emailed statement that it was pleased
that its unions supported "the need for the federal government
to address pension deficits in the current low interest rate
The airline said it is in discussions with the government,
and it declined to comment further.
Canada's finance department also declined to comment.
The previous agreement is due to expire in Jan. 30, 2014,
and Air Canada is pressing Ottawa to extend the cap another
Two of Air Canada's unions supported the request as a
condition of their arbitrated settlements, and two others have
CAW Local 2002 represents 3,800 customer service and sales
agents across Canada at Air Canada.
In exchange for the CAW's support of the pension proposal,
Air Canada has offered to extend a deadline to implement new
pension rules for employees by one year to Jan. 1, 2014.
Air Canada's more liquid "B" stock finished down 3.7 percent
at C$1.81 on the Toronto Stock Exchange on Thursday. The stock
has more than doubled in the past six months as the airline has
managed to implement various cost-cutting initiatives and boost
traffic while also raising ticket prices.