History of Successful Air Canada | The aircraft carrier industry is one which is never free from some crisis or the other. Air Canada was saved from one such crisis by Ottawa recently. This helping hand will prove to be the savior of the airline which otherwise faced solvency in 2014. The helping hand was in the form of relief from its pension funding obligations over a period of seven years to come.
The current cap on pension payments had been negotiated in the year 2009, with the federal governments and the unions of the airline. According to the new arrangements decided by Ottawa in consultation with the airline officials, the carrier will have to pay in addition to current service payments an amount of $150 million at least. This payment will be towards it pension plan which will be at an aggregate minimum of $1.4 billion which can be paid over a period of seven years to come.
The executive compensation will be frozen at the rate of inflation and other special payments and bonuses will be limited. At the same time the company is restricted from implementing a dividend or share buyback program. Air Canada was aiming at a $150 million cap for a period of 10 years, but even so the deal that they got was a good one considering the alternative. The announcement made by the government is being viewed as a significant and positive development in favor of the airline, both by the carrier’s employees and market experts.
The positive effects of this decision are already being observed in the stock market as the value of the shares of the company rose by three percent almost immediately. They are expected to rise further and the officials of the airline have an ambitious target of a price of $4 per share, although experts believe that this may be a little difficult to achieve. However, most of them agree that the prices could easily touch $3.55 per share very soon.
This increase in the price is in addition to the 50% that the Air Canada shares have gained over the period of one year. This development will allow the company to improve revenues, reform the cost structure and enhance their profit margin. The liquidity issues related to pension fund having been resolved, the airline can breathe a sigh of relief and concentrate on implementing its growth plans for the next year with the fleet of new 787s that are going to be added to its fleet.