MONTREAL, March 12, 2013 /CNW Telbec/ - Air Canada and the Government of
Canada have agreed to an extension of Air Canada's pension funding
arrangements to January 30, 2021. After lengthy negotiations the
initial Air Canada proposal was strengthened with additional required
solvency payments, a shortened term and specific new conditions that
will ensure that all employees and executives of Air Canada are part of
the solution.
This arrangement comes as a result of the upcoming expiration of the Air Canada Pension Plan Funding Regulations, 2009 on January 30, 2014. In the current extremely low interest rate
environment, Air Canada's pension solvency deficit funding payments
would be unsustainable without this extension in place.
According to the agreement reached with the federal government, new
regulations will be adopted under the PensionBenefits Standards Act in respect of special payments under Air Canada's defined benefit plans
to cover the period between 2014 to 2020 inclusive, expiring January
30, 2021. According to the terms of the agreement, subject to the
maximum past service contribution permitted under the Income Tax Act
for the plan year, Air Canada will make payments of at least $150
million annually with an average of $200 million per year over seven
years. Over this seven-year period, Air Canada will contribute an
aggregate minimum of $1.4 billion in solvency deficit payments, in
addition to its pension current service payments.
During the time the regulations are in force, Air Canada will be subject
to a series of covenants and undertakings, including no dividends and
share repurchases, certain limitations on executive compensation
arrangements and no pension plan benefit improvements without
regulatory approval.
Air Canada's Canadian-based unions had previously expressed their
support for Air Canada's extension request and the arrangements are
subject to successfully concluding a consultation process with Air
Canada management and retiree beneficiaries. Air Canada will submit to
the Office of the Superintendent of Financial Institutions (OSFI) all
communications materials it intends to send to pension plan
beneficiaries prior to funding the plans in accordance with the new
regulations.
The new funding arrangements will become effective upon the execution of
formal documentation and the subsequent adoption of new regulations
under the Pension Benefits Standards Act, subject to Governor in Council approval.
In July 2009, the Government of Canada adopted the Air Canada Pension Plan Funding Regulations, 2009. These regulations established maximum levels of past service
contributions (i.e. special payments to amortize the plan solvency
deficits) to its ten domestic defined benefit registered pension plans
in respect of the period ending January 30, 2014. During this
five-year period, including payments required to be made in 2013, Air
Canada will have contributed a total of $1.479 billion in past service
contributions and in current service costs.
Air Canada is Canada's largest domestic and international airline
serving more than 175 destinations on five continents. Canada's flag
carrier is the 15th largest commercial airline in the world and in 2012
served close to 35 million customers. Air Canada provides scheduled
passenger service directly to 59 Canadian cities, 55 destinations in
the United States and 64 cities in Europe, the Middle East, Asia,
Australia, the Caribbean, Mexico and South America. Air Canada is a
founding member of Star Alliance, the world's most comprehensive air
transportation network serving 1,329 destinations in 194 countries. Air
Canada is the only international network carrier in North America to
receive a Four-Star ranking according to independent U.K. research firm
Skytrax that ranked Air Canada in a worldwide survey of more than 18
million airline passengers as Best International Airline in North
America in 2012 for the third consecutive year.
CAUTION REGARDING FORWARD-LOOKING INFORMATION
Air Canada's public communications may include forward-looking
statements within the meaning of applicable securities laws.
Forward-looking statements, by their nature, are based on assumptions
and are subject to important risks and uncertainties. Forward-looking
statements cannot be relied upon due to, amongst other things, changing
external events and general uncertainties of the business. Actual
results may differ materially from results indicated in forward-looking
statements due to a number of factors, including without limitation,
industry, market, credit and economic conditions, the ability to reduce
operating costs and secure financing, pension issues, energy prices,
employee and labour relations, currency exchange and interest rates,
competition, war, terrorist acts, epidemic diseases, environmental
factors (including weather systems and other natural phenomena and
factors arising from man-made sources), insurance issues and costs,
changes in demand due to the seasonal nature of the business, supply
issues, changes in laws, regulatory developments or proceedings,
pending and future litigation and actions by third parties as well as
the factors identified throughout Air Canada's public disclosure file
available at www.sedar.com. Any forward-looking statements contained in this news release
represent Air Canada's expectations as of date of this news release and
are subject to change after such date. However, Air Canada disclaims
any intention or obligation to update or revise any forward-looking
statements whether as a result of new information, future events or
otherwise, except as required under applicable securities regulations.
SOURCE: AIR CANADA
