CANADIAN LABOUR-AIR CANADA:

AIR CANADA PENSION DEAL REACHED:

This country's perpetually floundering air carrier, Air Canada, has reached an tentative deal with the five unions that represent its employees (CAW, CUPE, IAMAW, the Air Canada Pilots Association and the Canadian Airline Dispatchers Association) over the long festering matter of the airline's pension obligations. Air Canada, of course, should stand as the eternal poster child for the reality that ideologues of both the right and the left can never admit ie that some outfits will be woefully mismanaged no matter whether they in private or public hands.

The matter of the pensions was merely another of a seemingly endless string of near death experiences that have threatened to throw Air Canada into bankruptcy over the years. The deal agreed to by the unions has all the odour of a "making due with a bad situation". See Molly's comments at the end of this article. For now, here's the story from the CBC.

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Air Canada workers to be shareholders after pension deal:
The Canadian Press
Unionized employees at Air Canada are about to become shareholders with a 15 per cent stake in the airline, for agreeing to a year-and-a-half pension moratorium.

The Montreal-based airline plans to issue more than 17.6 million class B shares next week to a new trust, on behalf of its Canadian-based unions.

The issued shares are part of an agreement struck in June, in which workers accepted a 21-month moratorium on past service contributions to their pension plans, and $550 million in payments due between 2011 and 2013.

Air Canada said the class B shares won't "materially affect control" of the airline.

As part of the deal, the airline's unions will have the right to designate one member of Air Canada's board of directors ,as long as the trust holds at least two per cent of the outstanding class A and B shares.

That appointee cannot be a member or officer of any of the unions.

Air Canada's class B shares were unchanged at $1.44 in trading Monday on the Toronto Stock Exchange.

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MOLLY NOTES

On the surface of it the above may seem like just the sort of thing that anarchists like Molly and other libertarian socialists advocate ie that ownership of enterprises should be transferred to those who work in them. In actual fact it is the furthest thing from such, and is likely to be a bad deal in general in addition. Let's look at a few of the points raised by the article above.

First of all it has to be admitted that the unions involved have been bargaining "under the gun", as the political climate nowadays is such that our present government seems more than willing to let an enterprise such as Air Canada go into bankruptcy. From the perspective of national interest such enterprises as Nortel (especially) and much of the auto industry in Ontario are much more important than Air Canada, but the Conservative Harperites have been more than willing to see them go under or be seriously pared. There is also no doubt that Air Canada which has been teetering on the verge on insolvency for many years now is actually in danger of having to really bite the bullet at the present time. All that being said is this the best deal that could have been obtained ? Will the full implications of this deal be presented to the memberships of the unions who negotiated the agreement ? Will the members actually get to vote on the deal just as if it was an ordinary collective agreement ? I have serious doubts about all three questions.

What are these "class B" shares that are being talked about ? Class A shares, often referred to as "common shares" have voting rights at stockholders' meetings. Class B (there are other classes, but let's leave that complication aside for now) may have different voting rights. They may have more weight than common shares, but quite often these "preferred shares" (a misnomer if there ever was one) have no voting rights. That seems to be the case in the context of this deal, if one is to believe the statement of Air Canada management as to how these shares won't "materially affect control of the airline". It seems that, just to make sure this is the case, that the deal contains two extra provisos. One is that the shares will be held "in trust" so that their disposition will be out of the control of the unions involved, let alone the membership of said unions. The second proviso is that the lone board member to be appointed by the unions (dollars to dimes this will be from the Pilots' Association) cannot have any formal connection with the unions involved. This assures that only the friendliest (to management) director possible will eventually be appointed, especially as the wheeling and dealing amongst the five unions assures the maximum possible disorder on the part of labour.

The opinion of anarchists, libertarian socialists, those who believe in a "cooperative" form of socialism and those socialists who have finally (after so much historical failure) been weaned from their statism and belief in government owned enterprise about such things is that both formal ownership but especially real control should be transferred from management to democratic bodies of people who actually work in an enterprise. Political differences amongst this group of people revolve around the "speed" of this transfer and the "completeness" of same. Anarchists are at one extreme pole is saying the speed should be 'as fast as possible" and the extent should be "complete".

This deal doesn't even give the union bureaucrats involved any control (aside from haggling over which friend of theirs will receive the perk of a directorship), let alone the ordinary worker. That might be tolerated if the unions involved had been honest about what they were doing. If you want to give Air Canada a loan then honestly admit that is what you are doing- giving Air Canada a loan- and haggle about the best terms of the loan. Unions have done such things before for business, and they have often negotiated better deals than this.

Let's go back to the terms of the shares. Because the shares involved have no voting rights they have no control over future decisions on the part of management to "dilute" their value by issuing further shares. In other words each and every issue of further shares on the part of Air Canada will reduce the value of said shares by a corresponding ratio of the old number divided by the new number. These class B shares have no voting rights about whether such offerings will be put forward. It gets worse. Most class B shares have "back end loads" as opposed to the "front end loads" of class A shares. This means that all the fees of purchasing and selling such shares will happen when one attempts to sell such shares rather than when one purchases them. In other words the actual value of such shares is less than their real value by an uncertain number, depending upon future market conditions. The actual value of the shares in Air Canada is actually less than the book value that appears in the deal. Have these complications been explained to the membership of the unions involved ? I doubt it. Then there is the question of 'transferability'. Suppose that you are 40 years old and that you get laid off by Air Canada tomorrow in the name of 'efficiency'. Your pension benefits are being held "in trust" in an uncertain agreement (that may be changed at management's whim) for your former union with a corporation with an uncertain future. Does this say that the whole thing is "uncertain" to you ? What you have given up is a defined pension, with whatever uncertainty it may contain over transferability, for something that has two or three extra levels of uncertainty about it. If you are laid off do you still have any rights to the benefits, large or small as they may be, of the class B shares 20 years from now when you retire ? Who the hell knows. In the majority of cases probably not.

For purposes of comparison let's compare this Air Canada offer (and its acceptance on the part of the unions) to the West Jet Employee Ownership program. I do not intend to glorify the West jet program as an example of libertarian socialism in action. Its structure, along with its profit sharing plans, also solidify management control of the corporation, as surely (but with less hypocrisy) as the Air Canada/union agreement. Its greatest benefit to the ordinary worker, that his or her common (class A) shares are individually held and may be sold at any time after one year of holding, is also a guarantee of eternal management control in that the employee shares are dispersed and lack any mechanism of collective power to influence corporate policy. As a "gamble" it is, however, a better gamble as the employee is free to invest up to 20% of his or her salary in the 'stock option' to buy West jet stock, a sum that the company will match dollar for dollar in terms of real investment. Compare this to the Air Canada deal where employees are asked to give up benefits that they "thought" were their property for an uncertain return that they have no control of (they cannot sell out individually) and that they may not receive at all.

There are undoubtedly many other reasons why West Jet continues to make a profit, even in times of increased fuel prices and in times of recession. while Air Canada continues to lose money year after year. Their profit sharing agreement and their share options for employees are only two of these reasons, but they are important ones. Managerial caution in terms of expansion may be another very important factor. For most of us, Molly included, our acquaintance with airlines is only as customers. All that I can say from my flying experience is that the rather informal and non-hierarchical atmosphere os West Jet is a much more pleasant experience than flying via Air Canada. Christ on the Cross, they actually have humour. I know very well that simply giving employees latitude and a certain amount of freedom on the job is not the same as real workers' control. It still, however, is an advance. I would much rather fly West Jet, given a choice, than Air Canada, and the generally lower price is only one factor.

So what would I say in conclusion ? It would be my preference that ant such loan !!!!! to Air Canada would have been made under conditions of collective control by the membership of the unions involved ie that the shares would have been ordinary common shares vested in unions who had democratic voting procedures over their disposition. Barring that it would have been better that the loan granting procedure have been explicit and that better guarantees for the rights of the individual members would have been in place.