This article was last updated on April 16, 2022
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The recent announcement of Ottawa declaring that it has decided to ease the deal with Air Canada for overcoming its $4.2-billion deficit in pension plans have given the airline some breathing room, while it works on launching a new discount service. However, the conditions imposed on Air Canada under that deal may be fatal for other companies looking for the same help with their pension plans, which have been hurt by volatile stock markets and super low interest rates.
An analyst, Walter Spracklin, claims that “in the current low interest rate environment, Air Canada’s pension solvency deficit funding payments would not be sustainable without the seven-year extension in place.” He added that “the funding cap allows Air Canada the ability to invest in new growth opportunities, including a fleet replacement plan with 37 Boeing 787s, which is set to further improve profitability and operating cash flows.”
However, a tough competitor of the country’s largest airline, WestJet, has proven to be a considerably more profitable company over the past decade. WestJet Airlines made a declaration on Wednesday, asserting that Air Canada shall not get any more special treatment from the government. The chief executive of WestJet, Gregg Saretsky, mentioned in a press statement that “while we recognize this has been a difficult decision for the government, we are disappointed with this announcement.” He added that “we are supportive of a strong and competitive aviation industry in Canada… 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.”
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