Air Canada, Montreal, on Wednesday said it had an estimated C$780 million (US$618 million) surplus in its defined benefit plans as of Jan. 1.
That’s up from the C$89 million surplus as of Jan. 1, 2014, and a C$3.7 billion deficit reported at the start of 2013.
Air Canada’s pension assets as of Dec. 31 totaled C$16.3 billion, spokesman Peter Fitzpatrick said. That is up 19.9% from a year earlier. Actual liabilities will be available by June 30.
The airline said that because of the improved funding, by midyear it could opt out of an agreement with the Canadian government and Air Canada employees begun in December 2013, which required Air Canada to contribute at least C$150 million in special funding to the pension funds annually through 2020.
In an analysis of operations and finances issued by the airline Wednesday, Air Canada said it can opt out when its annual contributions to the pension plans would be less than C$200 million under normal funding rules “and when there would be a strong basis for confidence that the airline’s derisking strategy would make a future significant deficit unlikely to reoccur.”
Air Canada said based on normal funding rules, its pension contribution this year would be about C$90 million. Also, as of Dec. 31, the airline had about 72.5% of its pension liabilities matched with fixed-income products.
The agreement also requires the airline to cap its management’s wages and bonuses and its payout to shareholders throughout its seven-year term. That would also be voided if the airline opts out, Mr. Fitzpatrick said.
