By Roger Annis, June 19, 2012
A new collective agreement has been imposed on the 8,600 members of the IAM union at Air Canada. On June 17, an arbitrator declared a five-year collective agreement following a process in which he had a choice between ‘final offers’ by the company and the union. He went with the company.
The arbitration process issued from a referral by the federal government to the Canada Industrial Relations Board on March 8. Collective bargaining was not working for Air Canada. In February, the IAM members rejected a proposed agreement. The following month, they staged several wildcat strikes.
In recent years, the federal government has threatened or legislated the effective outlawing of the right to strike in federally-regulated industries, including the postal service, railways and airlines. In this latest case, no legislation was required; the IAM voluntarily ceded to the arbitration order.
The ruling apparently includes modest wage increases of several percent per year. New hires will now have a second-class pension. The insolvency of Air Canada’s pension plan for existing employees factored largely in the arbitration proceedings. The plan is $4.4 billion (!) in the hole (see article at bottom of this page, and here). The IAM is supporting a move by the company to increase that deficit by continuing to postpone payments into the plan.
Maybe somewhere in the future there is a magic wand that will sweep away Air Canada’s insolvency and ensure that workers will have their pension when they retire. In the meantime, Air Canada workers will continue to suffer the fate of those like the app. 2,800 workers at AVEOS, the heavy maintenance division of Air Canada that was spun off in 2007. Most of them lost their jobs when AVEOS closed its doors in an overnight decision on March 18.
For more than 20 years, the accumulated value of the former public enterprise has been systematically looted by a privatization process that has earned billions for directors and investors, seen thousands of workers lose their jobs or suffer downgrades, and has turned many airline operations jobs into low wage ghettos. For background on the looting of Air Canada, see here and here.
Below are three news articles on the latest developments, plus a new report on the appointment of a Conservative Party insider to a top position at Air Canada.
Air Canada looks for more pension help
In a deal with one of its unions, airline has enlisted employee backing to ask federal government for an extension of a fund cap
By Brent Jang, Transportation Reporter, The Globe and Mail, June 19, 2012
Pension woes are back at the top of Air Canada’s concerns as the carrier seeks a new reprieve from retirement funding to avert a looming financial crisis. Faced with a cash crunch in 2014, the country’s largest airline is preparing to ask Ottawa for another moratorium on company contributions to pensions, and to request other measures to ease the pressure.
“It is of critical interest for the company to gain that relief now, thereby assuring its long-term solvency,” arbitrator Michel Picher said in a ruling that imposed a five-year contract on International Association of Machinists and Aerospace Workers. He chose Air Canada’s final contract offer over one proposed by the IAMAW, but emphasized that the union is backing management’s efforts to pressure Ottawa for further pension payment breaks.
The carrier’s pension payments are forecast to soar in 2014 because a cap on contributions previously negotiated with unions and approved by the federal government will lapse at the end of 2013. “The viability of the company and to a substantial extent, the viability of the pension plan, essentially depend on the granting of an extension of that pension fund relief, hopefully for a period of not less than 10 years beyond 2014,” Mr. Picher said.
As an incentive to secure the IAMAW’s support for lobbying Ottawa, management agreed to remove a 3-per-cent reduction on survivor pension benefits in the company’s final offer.
The new collective agreement has improvements for workers, building on the tentative pact rejected by IAMAW members in February, Mr. Picher said. Hundreds of IAMAW members staged a 14-hour wildcat strike in March.
“The willingness of the company to restore that pension benefit was clearly made contingent on the parties being successful in their joint ventures to the federal authorities for an extension of the pension funding relief beyond 2014,” Mr. Picher wrote. “Should that relief not be obtained, grave existential questions will arise with respect to the future of both the pension plan and of the company itself.”
In 2009, Air Canada secured a 21-month moratorium on pension funding, but the carrier estimated last year that it will be on the hook in 2012 for $359-million in past and current service contributions, followed by further funding obligations of $412-million in 2013 and $550-million in 2014. The Montreal-based carrier’s pension solvency deficit stood at $2.1-billion on Jan. 1, 2011, and analysts expect the airline to report a sharply higher deficit for Jan. 1, 2012. “Economic events of the last few years, including the recession of 2008 and a fiscal policy that has consistently favoured low interest rates, have in fact led to a significant growth in the pension deficit,” Mr. Picher said.
The 8,600-member IAMAW represents mechanics, baggage handlers, cargo agents, aircraft cleaners and electricians. Under the new contract that runs until March 31, 2016, existing employees will stay on defined benefit plans, but new hires will be placed on a less costly pension program. PI Financial Corp. analyst Chris Murray said the wage increases in the deal are in line with his expectations, ranging from 2 to 3 per cent annually. The previous contract expired on March 31, 2011.
Mr. Murray said newly hired workers going into an IAMAW sponsored multi-employer pension will enter plans that are defined benefit in name, but similar to defined-contribution programs.
Arbitrator Douglas Stanley is expected to issue his decision by the end of July to resolve a contract impasse with the Air Canada Pilots Association. Pilots say they are opposed to management making plans for a low-cost carrier that would violate contract rules by having others do the flying without the union’s consent.
Union says pension issues unresolved
By Brent Jang, Globe and Mail, June 20, 2012
Air Canada’s largest union says uncertainty lingers at the airline because of unresolved pension issues after an arbitrator sided with management’s final contract offer. Chuck Atkinson, president of IAMAW district lodge 140, said Tuesday that Air Canada’s new campaign to persuade Ottawa to provide pension funding relief places a cloud over the carrier.
Michel Picher, a government appointed arbitrator, chose management’s final offer over one proposed by the 8,600-member union. The airline’s pension solvency deficit rose to $4.4-billion as of Jan. 1, 2012, or more than doubling over the past year.
While the IAMAW has agreed to back Air Canada’s lobbying for pension relief, the union has no guarantees of a favourable outcome for workers, Mr. Atkinson cautioned.
Union backs pension plan
Wants government to extend cap on payments to reduce deficit
By Randall Palmer and Louise Egan, Reuters (The Gazette), Aug 8, 2012
Air Canada has won key union support for its bid for more relief on payments to erase its pension fund deficit, pressuring the Canadian government to agree even though Ottawa recently rejected similar requests from other companies. The pension deficit of the country’s largest airline doubled to $4.4 billion during 2011, primarily because of unusually low interest rates rather than any sudden demand on assets. Unions recognize the danger that such a big shortfall presents for Air Canada, even though the deficit has subsequently dropped by $1.1 billion because of recent labour contracts.
“In this extraordinary circumstance, we don’t want to do something that pushes the airline over the brink,” Paul Moist, president of the Canadian Union of Public Employees, which represents Air Canada’s flight attendants, said on Tuesday.
In 2009, the government agreed to Air Canada’s request for a moratorium on making any special payments to reduce its pension deficit through 2010, and then a cap on special payments that would rise from $150 million in 2011 to $225 million in 2013.
The company is now seeking to extend that cap until 2024, and labour arbitrators have ruled that without such relief, “grave existential questions” would arise about the future of the airline and its pensions. Moist was one of several union leaders who met Finance Minister Jim Flaherty on July 23 at Flaherty’s request to discuss Air Canada’s pension situation.
Flaherty had told reporters a month earlier that the most important condition that must be met for the government to agree to any extension would be that all parties — company management, current union members, pensioners and the country’s financial regulator, Julie Dickson — also agree.
Flaherty’s position is delicate because in June he told a group of six big corporations — including BCE Inc.’s Bell Canada and Canada’s two national railroads — that he was not prepared to enact special measures to give them more time to pay down their pension deficits.
He wrote them that reforms introduced in 2010 were designed to give companies flexibility and avoid volatility in running their defined benefit plans. He added that providing new temporary relief now could result in notably higher special payments later to eliminate deficits. A copy of the letter was obtained by Reuters.
“The big challenge for Air Canada is they (the six companies) have been rejected, and so what makes it possible for Air Canada to do this?” said one Ottawa insider, who declined to be identified.
The fact that Air Canada has hired Flaherty’s former chief of staff, Derek Vanstone, to oversee government relations and strategy might also make the minister want to appear not to show the airline any favouritism.
But for Bruce Aubin, who heads the pension committee for Air Canada’s retirees, comparing the air carrier with the six corporations is like comparing apples and oranges.
“Air Canada’s pension, it goes without saying, is in some difficulty. The other guys aren’t,” he said.
The retirees have not voiced an opinion yet on whether to back an extension of the special payment cap to 2024, and want to understand the ramifications, but Aubin said “we’re not opposed to it”.
“We’re supportive of buying time,” he said, adding that he was looking forward to meetings with the government and airline.
The head of another union who attended the July 23 meeting with Flaherty, Dave Ritchie, said the rules under which the pension deficit is being measured are too harsh because they look at the ability to pay out benefits if the company goes under rather than its ability to make payments if it stays in business.
“We’ve said to the government, ‘Look it, you need to send a message … to the investment community and let them know that a company is not going to fail because they are going to have this unfunded liability because of the way the funding mechanism is set up,”’ said Ritchie, Canadian general vice-president of the International Association of Machinists and Aerospace Workers.
“We have a lot of members that are retired, that need to know that they’re going to keep getting their cheques uninterrupted, for the amount they went out with. If they go into default, everybody takes a haircut.”
Moist said Flaherty was noncommittal at the July meeting but appeared sensitive to the airline’s plight. “I think he feels the same way the unions do. Nobody wants to do anything that precipitates, that puts the airline in any more difficult position than it’s already in.”
Harper aide’s jump to airline raises ethical questions
By STEPHANIE LEVITZ, Canadian Press, published in The Globe and Mail, July 20, 2012
A senior aide to the Prime Minister is taking a government affairs job with Air Canada, raising pointed questions about the strength of ethical rules that are supposed to guide the post-political actions of Parliament Hill staffers.
Derek Vanstone, currently Stephen Harper’s deputy chief of staff, will become Air Canada’s vice-president of corporate strategy and government affairs in September, the Montreal-based airline announced Thursday.
The hire was vetted by Conflict of Interest and Ethics Commissioner Mary Dawson; both Air Canada and the prime minister’s office said they were well aware of the ethical obligations facing Vanstone as he moves into the new role. “Air Canada understands that there are a number of postemployment restrictions for Derek with respect to federal government relations,” said airline spokeswoman Angela Mah. “Derek will be fully compliant with these restrictions.”
The hurdles Mr. Vanstone needed to clear to get the job include a five-year ban on becoming a registered lobbyist and a mandatory cooling-off period that prohibits involvement with any company with which he’s had significant government dealings.
The commissioner’s office wouldn’t comment directly on the case, and declined to discuss even generally how an individual with direct access to the Prime Minister could accept a government affairs job without being in breach of the act.
NDP Ethics Critic Charlie Angus called the appointment unacceptable. “What we are seeing here is again the old boys club, the revolving door,” Mr. Angus said. “It’s a nudge-nudge, wink-wink system that you have a senior adviser to the Prime Minister who will just happen to be now coming back as the man opening the doors for Air Canada. This is what Mr. Harper said he would clean up – and he hasn’t.”
The Conservative government was first elected in 2006 on a promise to build a stronger wall between ex-political staff and Parliament Hill. A slew of legislation followed, governing the activities of those seeking private-sector jobs that could connect them with the government.
Deputy Liberal Leader Ralph Goodale said it is too easy for both the PMO and Air Canada to hide behind the approval of the ethics commissioner’s office. “Being technically in compliance with the rules is not the same thing as being appropriate,” Mr. Goodale said. “This doesn’t pass the smell test.”
Mr. Goodale said his party will be writing to Dawson’s office to request a detailed explanation for the ruling. “She should explain to parliamentarians exactly how this is okay,” Mr. Goodale said. “And if does fit within the law, most certainly there are exemptions or exceptions that should be plugged.”
Ms. Dawson has raised issues with some of the provisions contained in the act before. “… Ensuring compliance with the act’s post-employment provisions remains a challenge,” she wrote in her 2010-2011 annual report. A House of Commons committee recently recommended 11 changes to the Lobbying Act to make it stronger.
Mr. Vanstone will have responsibility for Air Canada’s relationships with all levels of government as well as community and industry affairs, company CEO Calin Rovinescu said in a statement.
