Air Canada Loss of 132 million in the years strongest Q

[Jaques Strappe]

I think the bigger issue for Air Canada is getting out from under the defined benefits pension plans. That is a much bigger monkey on it's back than wages. May be fine for a crown corp but not sustainable in today's market and Air Canada has not been a crown corp for well over twenty years now. As the money markets shrink along with the economy and shrinking yields, the required pension supplements balloon, at a time when the company can least afford it.

The deal that Victor Lii proposed would have seen a much healthier Air Canada today in my opinion and I will never forgive the unions for with holding the details of that deal from it's members. The details surfaced after Victor Lii was told to pack his bags. A deal I would have gladly voted yes to. A deal that would not have had Robert Milton stuffing his suitcases with cash as he left the country.

Milton and Cerberus have raped any value out of AC and it's employees, so I don't expect anyone will rally from within in 2009, the feeling of betrayal runs too deep.

[ivanhoe]

JS

I agree 100%.

Putting Mr. Li on his boat was the most foolish thing the AC unions have ever done.

I would bet that AC's future would be much brighter now if it had gone down that road.

[rudder]

I think the bigger issue for Air Canada is getting out from under the defined benefits pension plans. That is a much bigger monkey on it's back than wages. May be fine for a crown corp but not sustainable in today's market and Air Canada has not been a crown corp for well over twenty years now. As the money markets shrink along with the economy and shrinking yields, the required pension supplements balloon, at a time when the company can least afford it.

The deal that Victor Lii proposed would have seen a much healthier Air Canada today in my opinion and I will never forgive the unions for with holding the details of that deal from it's members. The details surfaced after Victor Lii was told to pack his bags. A deal I would have gladly voted yes to. A deal that would not have had Robert Milton stuffing his suitcases with cash as he left the country.

Milton and Cerberus have raped any value out of AC and it's employees, so I don't expect anyone will rally from within in 2009, the feeling of betrayal runs too deep.

Absent another CCAA filing, do you really believe that there would be majority acceptance of a distress termination of the DB plan? Or are you suggesting that the current plan be 'frozen' and replaced with a DC plan? That would still leave a massive unfunded liability for past service that would have to be repaid over time. In addition, the replacement plan would have to be on the order of a 10-12% contributory plan by the employer to create even a semblance of equivalent benefit. As for the top-hat ....................

[Smitty]

Other former crown corporations (ie. CN rail for example) have done just that. All new hires come under the umbrella of the new defined contribution plan versus the old defined benefit plan. How much the company matches I don't know.

Maybe this is one route AC may try rather than re-visit CCAA and the current employees may actually be on side with this one.

[hoghead]

JS is 100% correct. If pensions are not addressed this time, the company will keep using it a big stick over everyones head to get other concessions. Then when everything else is stripped down they will get the pensions as well, its going to be the people with 20 + years of service left that are going to get spanked.

Read Miltons book, he hates DB and its his mission in life to gut it from AC. Its his Stanley Cup, then he will retire. Its time to get a bit more creative, you dont want any suprises in your last few years before retiring.

Too bad Milty didnt go for the full lawsuit with WJ the way he goes for his employees, there would have been some sour faces in yyc.

[Jaques Strappe]

Absent another CCAA filing, do you really believe that there would be majority acceptance of a distress termination of the DB plan? Or are you suggesting that the current plan be 'frozen' and replaced with a DC plan? That would still leave a massive unfunded liability for past service that would have to be repaid over time. In addition, the replacement plan would have to be on the order of a 10-12% contributory plan by the employer to create even a semblance of equivalent benefit. As for the top-hat ....................

I don't have a suggestion of what they should do, I just do not see the continued viability of a DB plan. I haven't for years and firmly believed that when Victor Li was making an offer, it would have been much wiser to negotiate a palatable exit from the Defined Benefit, rather than wait and have whatever rammed down your throat. At least Li was willing to give the employees at the time, a choice. Those who wanted to stay in a DB plan could. Those who wanted to opt for a DC plan would receive a 10% signing bonus for doing so. All employees hired after that date would be on a DC plan. At least in his offer, the airline would have been reducing its' liability with an eventual exit from a Defined Benefit all together. Anyone who thinks that a Defined benefit plan will be around for the next 15 to 20 years is dreaming in technocolor. In fact, personally, I don't see it lasting beyond the end of this decade.

A union local in YHZ tried to present this offer to its' members and was promptly shutdown by its' National leadership at the time.

Too bad Milty didnt go for the full lawsuit with WJ the way he goes for his employees, there would have been some sour faces in yyc.

Lol........I don't think he could have. That is why he settled out of court. What WJ management did was dishonest and lacked any integrity whatsoever but you really need to question the wisdom of firing someone and then handing them the keys to the safe on the way out the door. Milton screwed up, plain and simple but he is too arrogant to admit it, hence the lawsuit.

[rudder]

In 2007 AC spent 25 cents on benefits (incl pension) for every dollar in wages paid. This was approximately the same for 2006. 2008 is yet to be revealed but 2009 will be much higher still when the ballooning pension deficit is revealed. Is this sustainable? Who knows.

[whiteguy]

Lol........I don't think he could have. That is why he settled out of court. What WJ management did was dishonest and lacked any integrity whatsoever but you really need to question the wisdom of firing someone and then handing them the keys to the safe on the way out the door. Milton screwed up, plain and simple but he is too arrogant to admit it, hence the lawsuit.[/quote]

What makes you think it was Milty that settled out of court. I think its Clive that was looking for the deal. AC had a lot of dirt dug up in that case and alot of people in management were not happy that AC settled. AC could have done alot of damage to WS. Just what I was told from a very reliable source.

[Jaques Strappe]

What makes you think it was Milty that settled out of court. I think its Clive that was looking for the deal. AC had a lot of dirt dug up in that case and alot of people in management were not happy that AC settled. AC could have done alot of damage to WS. Just what I was told from a very reliable source.

Purely speculation on my part. But, if you really think about it, how was WJ management able to gather and exploit sensitive information about Air Canada's loads on certain routes in the first place? Usually, when a major player is let go, ( someone who has had access to sensitive information ) they are escorted off the property by Corporate Security after they have signed a non disclosure agreement. Instead, Air Canada handed him a password to the holy grail of load and schedule information. Granted that was meant for personal travel benefits but personally, I think a judge could have ruled either way. What he did was wrong but I think a judge would have found that Air Canada clearly provided the opportunity. Of course, that is just my opinion based on no legal training whatsoever.

[tonysoprano]

Instead, Air Canada handed him a password to the holy grail of load and schedule information.
Granted that was meant for personal travel benefits but personally, I think a judge could have ruled either way, had it gotten that far.

The naiive mentality of some of our pilots really worries me. Are you for real, bro? WJ STOLE this info. That's it, that's all, Jacques. The temptation was there, they went for it. They could have said "no, that's not ethical". Or "no, we KNOW that's ILLEGAL!!!" Milton settled out of court probably on the advice of our council who knows all too well how Canadian justice works. It would have cost us millions just to achieve the save result. AC would not have gained much in dollar value. probably would have cost too much in legal fees. So the two had a cigar and some cognac and talked about their toys instead. Milton managed to embarrass them and that, in the end, was good enough. But it's all in the past now. Everyone has forgotten. So, who had the last laugh? Yah, you guessed it. The koolaid gang.

[Four1oh]

Tony, just do a search and read the dozens of threads devoted to the lawsuit. If it was obviously illegal, it would have been an open and shut case, and Milton would have won his lawsuit, and sure as hell wouldn't have dropped the case if it was.

[tonysoprano]

Maybe. I don't know Four1Oh. What I do know is that what your compamy did was unethical and illegal. You would have been better off standing at our gates counting pax as they boarded. Companies have passwords to their websites for one reason. It's called privacy. There is also a lengthy "agree to terms" which says that it's confidential info and any unauthorized use is prohibited. Pretty strait forward stuff to dummies but in court, well, a different story I guess. But I'd be willing to bet that if it happened again it would be handled very different this time.

[Four1oh]

Unethical, I agree, no doubt about it. Those who were involved lost their jobs over it. Illegal? Nope, since there would have been a conviction. Come on, Tony, Milton would never have given in had there not been a stalemate. The lawyers were getting rich arguing for both sides, and Milton and Beddoe came to their own understanding in the end. It's pretty cut and dried as far as I'm concerned.

[Jaques Strappe]

tonysoprano wrote:

The naiive mentality of some of our pilots really worries me. Are you for real, bro? WJ STOLE this info. That's it, that's all, Jacques. The temptation was there, they went for it. They could have said "no, that's not ethical". Or "no, we KNOW that's ILLEGAL!!!" Milton settled out of court probably on the advice of our council who knows all too well how Canadian justice works. It would have cost us millions just to achieve the save result. AC would not have gained much in dollar value. probably would have cost too much in legal fees. So the two had a cigar and some cognac and talked about their toys instead. Milton managed to embarrass them and that, in the end, was good enough. But it's all in the past now. Everyone has forgotten. So, who had the last laugh? Yah, you guessed it. The koolaid gang.

Tony

Yes, I am for real and perhaps, I would suggest you do some fact checking before mud slinging on your fellow colleagues. Why do you think that now, before you can gain access to the travel website, you must click agree to a non disclosure clause? That was not there before the M.H. incident. Why do you think it is there now? Magic? You have an obvious hate on and contempt for your fellow aviators at Westjet and although I agree that the exploitation of Air Canada's load info was not ethical, it was never proven to be illegal and never will be because the case never made it that far. Ever wonder why? Do you really think for a minute that the Air Canada brass has a higher ethical value? Sorry bro, if the naive mentality shoe fits, by all means, wear it.

[tonysoprano]

Jacques baby.
This is one of those things we can talk about forever and still not agree on. The very fact it didn't make it to court was unfortunate. If there was a law broken, we will never know. We can only express opinions on it and that's all I'm offering. I'm not a lawyer but I think espionage is punishable by law. You can call that whatever you want, illegal, unlawful, punishable... whatever. No big deal, as I said the end result would have been the same. A small settlement out of court. It has nothing to do with hate and contempt for WJ. Some of us defend our employer when it is required and criticize them too when it is required. Maybe you don't like my style. I only react to what my "fellow aviators" say and HOW they say it. That's a whole different topic which I still believe we have some pretty passive types from AC. Hey, whatever makes you feel good. It's not my place to tell you what to do. AC is a big place, we have all different types.

[Jaques Strappe]

Jaques Baby...

????

Tony

You and I probably agree on more things than you know. For instance, If I hand you the keys to my house, ask you to keep an eye on it and you subsequently steal all my stuff, you have probably broken the law. That analogy could be used in this instance. Most corporations however, have very specific ways of terminating employment, particularly when it is someone who has access to sensitive information. This is done to mitigate any risk like Air Canada suffered in this instance. I do believe that for Milton to be so willing to settle, so quickly, there must have been a damn good reason for it and it certainly could not have been the settlement itself. Something you and I will never know but I have very little trust or faith in what our current management says or does.

I am indifferent to "your style" but I don't think I am alone in thinking that you don't care too much for Westjet. That is fine, they have obviously offended you in some manner. There are always a few sour grapes in a bunch but for the most part, I think we need to support each other rather than slander each other. and leave the sour grapes to rot by themselves.

[tonysoprano]

You must be very easily offended. I'll try to keep my remarks as generic as possible for you

.

I wasn't reffering to you. See, this is where the problem is. Most times it's just misunderstandings. "Lost in translation"??

Jauques. I never said that the former employee wouldn't be prosecuted as well. He's just as guilty. But WJ took the bait as well. AC's weak security policies don't illiminate the fact that espionage took place. BTW, I don't agree that Milton reconciled that quickly. As I recal the stunt whent on for a very long time. In the end, I think he saw the fact that the reward of winning a trial would not be enough to offset the lawyer fees and would also expose the weak practices that AC management had at the time. An out of court settlement was inevitable. I could be wrong.
Yep, I agree. We need to support each other. You don't respond to the slander from that small group of WJ guys who poke fun at you or wish that your employer was gone. Good for you. You have some fine virtues. I tend to like to respond to it.

[Brick Head]

Jacques and Rudder have added much insight into the pension obligations at AC.

The following is strictly my opinion.

Are we heading for a game of chicken?

Is ACE going to turn into a "withholding" company

ACE wants to sell AC. Been tough to do, and the recent market drop combined with the resulting pension deficit? Now probably impossible.

So what will ACE do?

We have a holding company, ACE, with 824 million in cash generated from the sale of AC assets.

We have the original company, AC, with actually a decent balance sheet and cost, if you subtract pension obligations. The problem is the pension obligation is now such a mountain that recovery is likely now beyond reach. Adding cash or debt to the situation will just start the cycle that killed AC last time. Not good for anyone.

As rudder rightly pointed out. The unions will not agree to pension reform without another confrontation with CCAA.

My guess ACE is going to give the AC employees just that. An ultimatum.

Talk pension reform and we will invest in the future of AC. Refuse to talk pension reform and we walk with our 824 million.

Leaving the Unions really with no choice.

Now before people get really upset. There are many many things that can be done to fix the deficit issue. DC pension. DB pensions with lower benefits. Increase our own contribution to maintain the benefit. Combination of all three?

Another point I would like to make is this. All of these solutions are the employees releasing the company from it's obligations. Improving the balance sheet, at employee expense, so that ACE can eventually sell the company. We need to be smart this time.

We need to demand a piece of the pie in exchange for our contribution. We can not allow ACE to hammer us again, then watch them profit from our loss.

In that regard I believe we need to be proactive this time around. No more head in the sand. Deal with it. Deal with it right. Make sure we get a piece if we are to contribute. Make sure the resulting company is viable and not stripped by a vulture fund.

For our own good we need to think less like a union, and more like a business man.

For your consideration.

[tonysoprano]

I suspect ACPA will give pension reform a good look. Since pension reform will affect different groups differently, it will be tricky to satisfy everyone. But if management holds the proverbial gun to our heads, the good look may be short lived.

[rudder]

It is fairly obvious that ACE (read: Cerberus) is not interested in using what they consider to be their cash to solve AC's pension deficit problem. My guess is that the timing of an ACE/AC transaction will not be until after OSFI has cut a further deal that relieves AC's cash stress due to required pension contributions and the CCAA threat is passed, including possibly closed labour agreements.

There is most certainly a game of brinksmanship shaping up for 2009.

p.s. labour could have walked away from CCAA circa 2004 with a much larger piece of the ownserhip pie in ACE if it had acted as one voice rather than as tribes.

[Jaques Strappe]

Brick Head

I think you are quite right in your thinking. The last time around, we gave up a lot to keep a DB while in CCAA. I would hate to see it happen again and again and again, until it is gone, which is the inevitable path in my belief. I am hopeful, now that we have lowered the average age of the pilot group considerably, that pressure will be put on the union to "negotiate" a mutually beneficial exit from DB before it is just arbitrarily taken away without any negotiation whatsoever.

During CCAA, the propaganda that came out of ACPA regarding the need to give up what ever it takes to keep the DB made it very apparent that the seniors were protecting themselves rather than the greater good of the whole. Each memo that came from the pension committee, I took to my financial adviser, who is a VP at Nesbitt. I don't know how many times I heard the same story. " This is nice for people retiring in the very near future but don't count on it being there when your time comes."

When you really look into what is required to maintain a Defined Benefit pension plan, I can't blame Air Canada management for wanting to get rid of it when everyone else has. I expect they will do whatever they can to get it off their books.

In my opinion, as long as we fight to keep it, wages will continue to fall to offset the costs. For me, I would rather increase the wages, have a healthier balance sheet and maintain some control over my investments. If the unions hadn't been so arrogant towards Victor Li, without consent from the members, the pension issue would not be before us, once again.

At the same time, if this falls before the government, I think we should also rally to cap the outrageous compensation packages and parachutes that our current regime is so fond of.

[rudder]

GM Canada's pension plan troubled before market collapse

Nov 15, 2008 04:30 AM

James Daw

General Motors pensioners in Canada are seeking advice from a leading pension lawyer as the embattled automaker holds out its hand for help from the American and Canadian governments.

Mark Zigler of Koskie Minsky LLP, whose firm has represented everyone from pensioned hockey stars to Eaton's store clerks, has agreed to speak at an autoworkers' union hall in Oshawa Dec. 1.

His topic: What happens to pensioners when a company fails and its pension fund is seriously short of money?

The pensioner who helped get Zigler to attend the pensioners' meeting has vowed to grill him on what he thinks he and his contemporaries should expect from the provincial government.

"I think it's the province that is at fault (for allowing the GM pension plan to fall so far behind in its funding)," said Karl Zimmerman, of Oakwood, Ont.

He fears the health of the plan will only get worse next year, as losses in stock markets spread to Canadian real estate.

At the moment, the pensioners' concerns are hypothetical, but their anxiety and suspicions are real. GM of Canada's spokesmen are refusing to talk about the pension plan in light of recent stock market losses and the parent company's dwindling cash reserves.

"We will not respond to the wild and inaccurate speculation of the Star regarding GM's future," spokesman Stewart Low replied in an email message yesterday.

GM had representation at a meeting yesterday with Premier Dalton McGuinty, whose province is home to most of General Motors of Canada's more than 30,000 blue-collar retirees – and which collects tax revenue on average pensions of $16,376 a year. (GM has announced it will have fewer than 9,000 factory workers by 2010.)

Ontario is also the only province with a Pension Benefits Guaranty Fund and a record of making loans to that fund when it is short of money, as it is today. That precedent, and the potential for a lawsuit over the province's failure to require GM to meet certain funding rules, makes Ontario a cheerleader for GM getting help from Washington.

GM's pension plan for current and former factory workers was in depressingly sick shape a year ago, with potential liabilities of $11.5 billion and a shortfall of $4.9 billion if it were to wind up without further contributions from GM.

The fund would be in much worse shape today if investments managers maintained their investing target of 69 per cent of the fund in stocks.

David Burke, a retirement practice director with Watson Wyatt Worldwide, said a pension plan with 96 per cent of the funds required to pay all earned benefits without further contributions a year ago would have had about 72 per cent funding by the end of October, and less today.

For those companies required to make up that shortfall within five years, "this will present a significant challenge."

Burke cannot comment on GM, which is a client. But GM is the only Ontario company not required to eliminate its funding shortfall, and its fund will be harder hit by falling stock prices than most.

A more typical weighting in stocks is 60 per cent and GM's U.S. pension fund has less than 30 per cent. The Canadian fund would have lost $1.4 billion or 32 per cent of its holding in stocks since the end of last November if it performed no better or worse than major market indices. Of course, the fund may have avoided the market mayhem if it sold off much of its equity holdings.

But if it stuck to its target this could leave the fund with as little as 55 per cent of the assets needed to pay all benefits.

This could result in a heavy claim on the Ontario guarantee fund, which is supposed to cover losses on the first $12,000 of an annual pension.
http://www.thestar.com/Business/article/537478

[bobcaygeon]

My personal thoughts match the old aviation saftey letter quote. "Learn from the mistakes of others as you won't live long enuf to make them all yourselves".

Learn from the "Big 3" auto companies current crisis because it will be AC's demise if we don't.

In my view, Canada's health care system is steam rolling down the same path. But that's a different topic altogether.