Air Canada announced that its Canadian unions and the Air Canada Pionairs have agreed in principle to repurpose about 17.6 million Air Canada shares originally issued to a trust established in 2009. The repurposed shares have a current market value of about $455 million based on their latest closing price on the Toronto Stock Exchange (TSX) compared to a market value of about $24 million when the shares were issued to the trust in 2009. If all conditions are met, the shares in the trust will be gradually sold over a period of up to 15 years with the net proceeds from the sales used to make lump sum payments to Canadian pensioners and offer voluntary separation packages for senior unionized employees and non-executive employees.

This announcement has its origins in mutually beneficial cooperation that began in 2009 when Air Canada and its employees faced a $2.835 billion solvency deficit in the company's defined benefit Canadian pension plans. Air Canada and its Canadian unions, namely ACPA, CALDA, CUPE, the IAMAW and Unifor, and its retirees' organization, the Air Canada Pionairs, worked together to help address this solvency deficit. In return for their cooperation at that time, a total of 17,647,059 Air Canada Class B voting shares were issued to a share trust. The intent was that the net proceeds from the sale of these shares could be used in the future to pay solvency deficits in the Canadian pension plans if this became necessary. Since then, the financial position of the pension plans has so significantly improved that it showed a $2.9 billion solvency surplus as at January 1, 2021, allowing the shares that had been put aside in 2009 to be repurposed as announced on November 12, 2021. The solvency surplus has continued to grow in 2021 reflecting an excellent high performing investment strategy over the past 10 years while maintaining a lower risk profile.

Terms of letter of intent and other background

Under the letter of intent agreed to by the unions and Pionairs, if all conditions are met, the pension share trust would gradually sell Air Canada shares beginning as early as the end of 2022 and continuing over a period not extending beyond 2037.

Upon consummation of the transactions contemplated by the letter of intent, trust shares having a value of $150 million would be allocated for voluntary separation packages (1) for senior Air Canada unionized employees to be made available in three rounds between 2024 and 2037 and (2) for Air Canada non-executive employees by 2037. Remaining trust shares (valued at about $305 million based on the latest TSX closing price for Air Canada shares) would be allocated for lump sum payments to Air Canada Canadian pensioners (unionized and non-unionized) of which the first $100 million could be paid as early as the end of 2022 with any remaining available proceeds to be paid out periodically to 2037.

There are several conditions to the completion of the agreement and the sale of the repurposed shares. These include the conclusion of definitive documentation, and the receipt of all required regulatory and other approvals. There can be no assurance that these or any other conditions will be satisfied.

For additional information relating to Air Canada's pension plans, please refer to Air Canada's public disclosure file available at www.sedar.com.