Canadian Finance Minister Jim Flaherty said on Friday he hopes to be able to help Air Canada resolve its pension deficit problem, but said it would be a “difficult road” and all parties must agree to a solution.
“It can be done,” Flaherty said, pointing to past pension agreements between the government and Air Canada, as well as with the Canadian Press news agency.
Air Canada faces a pension deficit that was estimated at CAD$4.4 billion (USD$4.26 billion) at the start of 2012, and the government has said it will look at the possibility of extending a moratorium on paying the deficit down that it granted the airline in 2009.
The moratorium is now scheduled to end in January 2014. A major union at Air Canada has supported the idea of extending the moratorium until 2024.
“The most important condition is that all parties agree,” Flaherty said. “This is not easy because the pension obligations are quite large, so I anticipate that it will be a difficult road, but I hope that all the parties will agree…”
In addition to company management and the government, current union members and retired pensioners would have to sign on to any pension agreement. The country’s financial regulator, Julie Dickson, would also have to clear it.
Flaherty hinted that Air Canada is not the only company facing difficulties meeting its pension obligations in the current environment of extraordinarily low interest rates.
“We have some substantial pension issues if I can speak more broadly,” Flaherty said, without naming other companies that might be asking for federal help.
“With low interest rates, the contributions that are expected by employers, including Air Canada, that are federally regulated are quite substantial. This is a much broader issue.”
Flaherty shrugged off any suggestion that helping out the airline would give it an unfair advantage over competitors such as WestJet and Porter Airlines.
“Competition in every business is largely based on price and I leave that to the competitors in that business,” he said.