- Arrangement would see landmark repurposing of over 17.6 million Air Canada shares to allow lump sum payments to pensioners and voluntary separation packages for unionized and non-executive employees.
MONTREAL, Nov. 12, 2021 /CNW Telbec/ – Air Canada today announced that its Canadian unions and the Air Canada Pionairs have agreed in principle to repurpose about 17.6 million Air Canada shares originally issued to a trust established in 2009. The repurposed shares have a current market value of about $455 million based on their latest closing price on the Toronto Stock Exchange (TSX) compared to a market value of about $24 million when the shares were issued to the trust in 2009. If all conditions are met, the shares in the trust will be gradually sold over a period of up to 15 years with the net proceeds from the sales used to make lump sum payments to Canadian pensioners and offer voluntary separation packages for senior unionized employees and non-executive employees.
Today’s announcement has its origins in mutually beneficial cooperation that began in 2009 when Air Canada and its employees faced a $2.835 billion solvency deficit in the company’s defined benefit Canadian pension plans. Air Canada and its Canadian unions, namely ACPA, CALDA, CUPE, the IAMAW and Unifor, and its retirees’ organization, the Air Canada Pionairs, worked together to help address this solvency deficit. In return for their cooperation at that time, a total of 17,647,059 Air Canada Class B voting shares were issued to a share trust. The intent was that the net proceeds from the sale of these shares could be used in the future to pay solvency deficits in the Canadian pension plans if this became necessary. Since then, the financial position of the pension plans has so significantly improved that it showed a $2.9 billion solvency surplus as at January 1, 2021, allowing the shares that had been put aside in 2009 to be repurposed as announced today. The solvency surplus has continued to grow in 2021 reflecting an excellent high performing investment strategy over the past 10 years while maintaining a lower risk profile.
“Air Canada offers an incredible example of a company and its employees working together to overcome challenges and achieve shared success. By supporting our pension strategy since 2009, our unions, employees and pensioners have helped our company in its efforts to turn on its head a pension solvency deficit of almost $3 billion into a surplus of nearly the same amount. This was not only crucial to Air Canada’s transformation into a global champion, but also helped protect our defined benefit plans,” said Michael Rousseau, President and Chief Executive Officer of Air Canada.
“That cooperative spirit is on display again in this agreement to repurpose over 17.6 million shares for the benefit of our defined benefit plans’ Canadian pensioners and active employees by providing a source of funding for lump sum payments to pensioners and
voluntary separation packages that may be offered to senior unionized employees and non-executive employees to help them explore new alternatives if they wish. I thank all stakeholders for their foresight and continued collaboration to ensure the long-term sustainability of Air Canada and the Canadian defined benefit plans.”
Terms of letter of intent and other background
Under the letter of intent agreed to by the unions and Pionairs, if all conditions are met, the pension share trust would gradually sell Air Canada shares beginning as early as the end of 2022 and continuing over a period not extending beyond 2037.
Upon consummation of the transactions contemplated by the letter of intent, trust shares having a value of $150 million would be allocated for voluntary separation packages (1) for senior Air Canada unionized employees to be made available in three rounds between 2024 and 2037 and (2) for Air Canada non-executive employees by 2037. Remaining trust shares (valued at about $305 million based on the latest TSX closing price for Air Canada shares) would be allocated for lump sum payments to Air Canada Canadian pensioners (unionized and non-unionized) of which the first $100 million could be paid as early as the end of 2022 with any remaining available proceeds to be paid out periodically to 2037.
There are several conditions to the completion of the agreement and the sale of the repurposed shares. These include the conclusion of definitive documentation, and the receipt of all required regulatory and other approvals. There can be no assurance that these or any other conditions will be satisfied.
For additional information relating to Air Canada’s pension plans, please refer to Air Canada’s public disclosure file available at www.sedar.com.
About Air Canada
Air Canada is Canada’s largest domestic and international airline, and in 2019 was among the top 20 largest airlines in the world. It is Canada’s flag carrier and a founding member of Star Alliance, the world’s most comprehensive air transportation network. 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. In 2020, Air Canada was named Global Traveler’s Best Airline in North America for the second straight year. In January 2021, Air Canada received APEX’s Diamond Status Certification for the Air Canada CleanCare+ biosafety program for managing COVID-19, the only airline in Canada to attain the highest APEX ranking. Air Canada has also committed to a net zero emissions goal from all global operations by 2050.
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