BUSINESS
05/31/2011 06:43 EDT | Updated 07/31/2011 05:12 EDT

Air Canada Union Pension Fight Over Plans For New Workers

(CBC) -- Three unions representing Air Canada flight attendants, ground crews, counter personnel and other workers are uniting to fight the airline's plan to introduce a defined-contribution pension plan for new workers.

The unions say they want Air Canada to stop considering proposed changes that would force new hires onto defined-contribution pension plans.

Defined-benefit pension plans, which Air Canada employees currently earn, are designed to provide retirees with a predictable income, but they expose the airline to additional costs if the pension fund's assets aren't able to pay for the benefits.

With defined-contribution plans, the airline's contribution is limited to a set negotiated amount and payouts to retirees depend on the performance of the underlying investments.

Air Canada was forced into creditor protection from April 2003 to September 2004, due in part to the cost of dealing with the company's pension deficit.

Air Canada's unions agreed to accept numerous concessions worth billions to help the company to survive, but they insisted their defined-benefit pension plans be saved.

During the restructuring, the airline saw a major potential backer walk away from a plan to invest in Air Canada after the unions refused to allow new employees be given defined-contribution pensions.

"While the precise features of the pension are determined through the normal collective bargaining process, the fundamental structure of our pension is not up for negotiation," the unions said in a statement Monday.

"We will make the maintenance of the plan, including employer contributions that are the necessary consequence of past funding deferrals, a central priority during our coming collective bargaining with Air Canada."

The three unions -- International Association of Machinists and Aerospace Workers, Canadian Union of Public Employees and Canadian Auto Workers -- said airline employees agreed to help the company through the global economic crisis by allowing it to defer major pension contributions.

CAW sets June 13 strike deadline

"The purpose of the deferrals was obviously not to provide the company with a subsequent excuse to eliminate pension benefits," the unions said, explaining that it gave the airline financial breathing room at a critical period, with the expectation that Air Canada would later make up for it once circumstances improved.

The unions said company executives receive defined-benefit pension credits, and regular workers should receive the same.

The CAW, which has about 3,800 members at Air Canada, has set a strike deadline for June 13 at midnight.

If talks fail to reach a settlement with the CAW, the airline said it plans to maintain full operations by implementing a contingency service plan at airports and call centres to minimize impact on customers.

The CUPE represents 6,800 flight attendants and IAMAW represents 11,000 mechanics, baggage and cargo handlers, and warehouse staff.

In a statement, Air Canada says it has been discussing possible solutions aimed at preserving defined-pension benefits for current employees.

As of Jan. 1, the company's pension deficit was $2.1 billion.

"This deficit is not sustainable and has not been sustainable for most of the decade, as it puts at risk both the viability of the company and the pensions of all employees," a spokeswoman wrote.

Last week, 67 per cent of Air Canada pilots voted to reject a tentative agreement, which would have seen new hires receive a defined-contribution pension plan.

Air Canada is Canada's largest domestic and international full-service airline providing scheduled and charter services to more than 175 destinations.