WestJet says it is disappointed with the federal government’s decision to extend Air Canada’s pension funding arrangement, calling it “special treatment” for the country’s largest airline.
“While we recognize this has been a difficult decision for the government, we are disappointed with this announcement,” WestJet president and CEO Gregg Saretsky said Wedneday.
“We are supportive of a strong and competitive aviation industry in Canada. To that end, we trust this marks the end of special treatment for Air Canada as such treatment at the expense of other industry players has become too common.”
Otawa announced Tuesday that it would give Air Canada more time to pay back its $4.2 billion pension plan shortfall under conditions that the airline accept a freeze on executive pay and bonuses, and prevent dividend payments or share buybacks.
The new agreement requires Air Canada to make payments into its pension plans of at least $150 million annually, totalling at least $1.4 billion over seven years, in addition to its current service payments.
“By taking this action, we are ensuring that Air Canada remains viable, that thousands of jobs are protected, and the service is there when Canadians need it,” said Finance Minister Jim Flaherty in a statement.
“Air Canada is the country’s largest airline and contributes significantly to the Canadian economy.”
Flaherty also noted that Air Canada’s unions and retirees have supported the change.
“This regulatory change is not costing Canadian taxpayers a single dollar, but it is providing Air Canada time to pay off the sizeable pension deficit,” he said.
WestJet says, however, that the decision creates an unfair advantage for the former Crown corporation.
“We look forward to working with the government to create a level playing field and an environment that supports a healthy industry that benefits the travelling public,” said Saretsky.
Air Canada’s pension deficit has been a long-standing problem for the company for years, exacerbated by low interest rates.
Without the new agreement, the airline would have been obligated to put $800 million into the underfunded plan next year. Air Canada posted a profit of $53 million last year, its first profitable year since 2007.
The Air Transport Association of Canada (ATAC) wrote to the government in February warning that the decision to grant Air Canada pension relief could create an uneven playing field in the air transport industry.
However, ATAC issued a release Mar. 8 withdrawing its opposition, saying the letter was perceived by some “as an affront to Air Canada and to its right to appeal to the government for help.”
“Our message addressed to the prime minister was seeking a level playing field for our industry but in no way were we intending any harmful effects to anyone,” said ATAC president and CEO John McKenna.
“ATAC has subsequently written to the Prime Minister and withdrawn our opposition to the Air Canada request and apologized for any confusion our letter may have caused.”
