October 29, 2018 at 3:35 PM
 
Recently, there has been some discussion regarding the Air Canada Share Trust among our membership.
Unfortunately, some of the rumours spreading across our workplace are inaccurate, which is understandable given how complex this issue is. The letter below ‘sets the record straight’ and will serve to inform readers on the purpose of the Share Trust.

The Air Canada Share Trust was created at a time when Air Canada’s pension plans looked much different from how they do today. In the first decade of the 2000s, Air Canada faced substantial deficits in its pension plans, with the deficit reaching over $4 billion dollars at the lowest point. 

Air Canada was required to make special payments that threatened their ability to operate.  In 2009, the company was in danger of going into CCAA bankruptcy protection again, as they were unable to make the required pension payments.

Air Canada asked Jim Flaherty, the Minister of Finance at the time, to provide relief in the form of a moratorium on the required pension payments for a period of 21 months.  The Minister made a pre-condition that the unions would need to sign a labour stability agreement that was in the form of a status quo collective agreement. 

The unions also had to agree to the proposed pension moratorium as this would cause further underfunding of the pension plan.  Minister Flaherty appointed Justice Farley to oversee negotiations with the unions on an expedited basis in May of 2009.

As a result, a key component of collective bargaining for all union groups was balancing the stability of their respective pensions against an employer that was struggling to survive while making the necessary special pension payments.

In June 2009, an agreement was reached between the employer (Air Canada), Unifor (CAW-Canada at that time), CUPE, IAMAW, ACPA, and CALDA.  A component of that agreement resulted in the employer issuing a substantial amount of Class B shares to the aforementioned groups.

In total, 17,647,059 shares were issued into a trust established for the purpose of providing some compensation to the pension plan for the further underfunding of the pension plans that would take place over the 21-month period and reduced payments for the following five years. 

This was approved by the Minister of Finance and OSFI (Office of the Superintendent of Financial Institutions).  The Income Tax Act of Canada was modified to include a provision referencing these shares and their purpose.  Each union had a different stake in the trust. Unifor’s (previously CAW) stake amounted to 12.58% of the shares.
  
The trust agreement set out the implications of a union selling its respective shares.   The agreement permits the proceeds to only go into one of the pension plans that is in a deficit position.  The proceeds would then be used to as employer contributions to address the outstanding solvency deficit.

Again, it is important to understand that this design was suited for the conditions that both Air Canada and the participating unions found themselves in during 2009. All parties were mindful that the pension plans and the survival of the company were in a precarious position.

Also, the share trust agreement was part of a broader set of agreements at the time relating to pensions that aimed to provide funding relief for Air Canada in order to ensure the continued viability of the corporation. The trust was not to be simply accessed and liquidated by participating groups, allowing for the proceeds to be distributed across the membership, and as currently structured, is not legally permitted.

The design of the share trust agreement has not changed since 2009, though there have been recent discussions among the Air Canada unions as to whether we could repurpose the trust in a way that better suits our members’ pension needs since the plans are in surplus.

Unifor’s position is that any amending of the share trust must be critically analyzed given the complexity of this trust agreement. In other words, the necessary legal and pension professionals will be involved in the process, and the guiding voice will be the best interest of our membership. 

Any change to the share trust requires the agreement of all five (5) AC unions, the approval of Air Canada, the Minister of Finance, the Canada Revenue Agency and OSFI, and is a complex legal issue that would involve a lengthy process. We hope this provides greater clarity to the Air Canada Share Trust Agreement and the restrictions within it.